Sunset review of the Arizona State Board of Tax Appeals: final report

ARIZONA STATE SENATE
RESEARCHSTAFF
TO: JOINT LEGISLATIVE AUDIT COMMITTEE
Representative John Huppenthal, Chair
Senator Robert Blendu, Vice Chair
DATE: January 4, 2005
SEANLAUX
LEGISLATIVE RESEARCH ANALYST
FINANCE COMMITTEE
Telephone: (602) 926-3171
Facsimile: (602) 926-3833
SUBJECT: Sunset Review of the Arizona State Board of Tax Appeals
Attached is the final report of the sunset review of the Arizona State Board of Tax Appeals,
which was conducted by the Senate Finance and House ofRepresentatives Ways & Means Committee
of Reference.
The Committee ofReference recommends that the Arizona State Board ofTax Appeals be
continued for ten years.
This report has been distributed to the following individuals and agencies:
Governor ofthe State of Arizona
The Honorable Janet Napolitano
President of the Senate
Senator Ken Bennett
Senate Members
Senator Dean Martin, Cochair
Senator Jack W. Harper
Senator Marilyn Jarrett
Senator Jack A. Brown
Senator Jorge Luis Garcia
Arizona State Board of Tax Appeals
Office of the Auditor General
Department of Library, Archives & Public Records
Senate Majority Staff
Senate Research Staff
Senate Minority Staff
Senate Resource Center
SL/jas
Speaker of the House of Representatives
Representative Jake Flake
House Members
Representative Steven Huffman, Cochair
Representative Ken Clark
Representative Jack Jackson, Jr.
Representative Michele Reagan
Representative Steven Yarbrough
House Majority Staff
House Research Staff
House Minority Staff
Chief Clerk
Senate Finance and House ofRepresentatives Ways & Means
Committee ofReference Report
ARIZONA STATE BOARD OF TAX APPEALS
Background
The Arizona State Board ofTax Appeals (BOTA) was established in 1974 to provide taxpayers
with an administrative forum to appeal decisions ofthe Arizona Department ofRevenue (DOR). BOTA
is a quasi-judicial agency that is not under the control or purview ofDOR, which is comprised ofthree
members appointed by the Governor. BOTA hears and decides appeals involving income taxes,
transaction privilege taxes, estate taxes, use taxes and luxury taxes, the award ofattorney fees and costs
and any other matter oftaxation assigned to it from a decision ofDOR and the Office ofAdministrative
Hearings. BOTA decisions may be appealed to Tax Court.
According to BOTA's FY 2004 Strategic Plan, the agency's goal is to receive and process tax
appeals expeditiously to prevent any delays in the appeals process. To achieve this goal, BOTA has the
stated objective ofmaintaining the current timely processing ofappeals and issuance ofwritten decision
within 30 days of Board action.
The Joint Legislative Audit Committee assigned the review ofa performance audit ofBOTA to
the Senate Finance and House of Representatives Ways and Means Committee of Reference.
Budget
According to the Joint Legislative Budget Committee, Fiscal Year 2005 Appropriations Report,
BOTA's FY 2004 budget estimate was $273,300, which is appropriated as a lump sum from the General
Fund. BOTA reports that the agency's FY 2004 actual expenditures were $238,200.
A.R.S. § 41-3005.11 dictates that the Board is to terminate on July 1,2005, unless continued.
Committee Sunset Review Procedures
The Committee of Reference held one public hearing on Tuesday, November 30, 2004, to
review the sunset factors prepared by the Board and to receive public testimony. Testimony was
received from representatives ofthe Board.
Committee Recommendations
The Committee of Reference recommends that the Arizona State Board of Tax Appeals be
continued for ten years.
Sunset Report Requirements Pursuant to A.R.S. § 41-2954
I. Identification of the problem or the needs that the agency is intended to address.
The Arizona State Board of Tax Appeals provides an inexpensive, independent, informal and
impartial venue in which taxpayers can be represented before an experienced tax tribunal by themselves
(in most cases), CPAs, enrolled agents, other authorized individuals or attorneys. The Board's
published decisions provide guidance to taxpayers within and without the State of Arizona.
II. Statement of the objectives of the agency and its anticipated accomplishments.
The Board's stated objective is to maintain the current timely processing ofappeals and issuance
ofwritten decisions within 30 days ofBoard action. The FY 2003-2004 estimate for backlogged cases
requiring a written decision was 10; the length for processing appeals was 6.5 months. The Board was
able to issue all written decisions within the stated timeframe and reduced the appeal processing time
from 6.5 to 4.5 months.
III. Identification of any other agencies with similar, conflicting or duplicative objectives and
an explanation of the manner in which the agency avoids duplication or conflict with other
such agencies.
The Board's objectives may overlap with those of the Department ofRevenue (DOR) and the
Office ofAdministrative Hearings (OAH). However, the Board is a quasi-judicial agency, the decisions
ofwhich, unlike DOR and OAH, are not subject to further administrative review. Board decisions are
appealable only to Tax Court, which is part of the Superior Court. DaR's main objective is to
administer and enforce the state's tax laws, while that ofOAH is to provide uniform hearing processes
among state administrative agencies. The Board's principle objective, however, is to provide taxpayers
with a fair and financially feasible opportunity for representation before a tribunal of focused tax
experts. These professionals are experienced in the field of taxation and are appointed by the
Governor - not salaried state employees. Thus, the objectives of the agencies are not duplicative.
IV. Assessment of the consequences of eliminating the agency or of consolidating the agency
with another agency.
The elimination ofthe Board would significantly and detrimentally impact the Arizona Superior
Court by increasing the caseload of the Tax Court. This would most likely result in fewer and less
timely decisions being issued in nonproperty tax cases. Additionally, the elimination of the Board
would impact taxpayer representatives, DaR and taxing authorities across the country that look for
guidance on tax issues. Lastly, the possibility of consolidation of the Board with another agency was
previously considered and rejected by the Regulatory Reform and Enforcement Study Committee.
Attachments
1. Agenda of the Senate Finance and House of Representatives Ways & Means Committee of
Reference.
2. Meeting Minutes of the Senate Finance and House of Representatives Ways & Means
Committee of Reference.
3. Agency response to the Sunset Questionnaire
4. Enabling Statute and Board Rules
5. Budget tables for FY 2003-2004 and FY 2004-2005
6. Strategic Plan
7. BOTA Meeting Minutes
8. BOTA Sample Decisions
Senate Finance and House of Representatives Ways & Means
Committee of Reference
Meeting Agenda
Interim agendas can be obtained via the Internet at http://www.azleg.state.az.us/lnterimCommittees.asp
ARIZONA STATE LEGISLATURE
INTERIM MEETING NOTICE
OPEN TO THE PUBLIC
SENATE FINANCE AND HOUSE OF REPRESENTATIVES
WAYS AND MEANS COMMITTEE OF REFERENCE
Date:
Time:
Place:
Tuesday, November 30, 2004
10:00 a.m.
Senate Hearing Room 1
AGENDA
1. Call to Order
2. Opening Remarks
3. Non-sunset Audit on the Gila County Transportation Excise Tax
• Presentation by the Office of the Auditor General
• Public Testimony
• Discussion and Recommendations by Committee of Reference
4. Sunset of the Board of Tax Appeals
• Presentation by the Board of Tax Appeals
• Public Testimony
• Discussion and Recommendations by Committee of Reference
5. Sunset of the Municipal Tax Code Commission
• Presentation by the Municipal Tax Code Commission
• Public Testimony
• Discussion and Recommendations by Committee of Reference
6. Adjourn
Members:
Senator Dean Martin, Cochair
Senator Jack Brown
Senator Jorge Garcia
Senator Jack Harper
Senator Marilyn Jarrett
11/19/04 cd
Representative Steve Huffman, Cochair
Representative Ken Clark
Representative Jack Jackson Jr.
Representative Michele Reagan
Representative Steven Yarbrough
Persons with a disability may request a reasonable accommodation such as a sign language interpreter, by contacting the
Senate Secretary's Office: (602)926-4231 (voice). Requests should be made as early as possible to allow time to arrange the accommodation.
Senate Finance and House of Representatives Ways & Means
Committee of Reference
Meeting Minutes
ARIZONA STATE LEGISLATURE
Forty-sixth Legislature - Second Regular Session
SENATE FINANCE AND HOUSE OF REPRESENTATIVES
WAYS AND MEANS COMMITTEE OF REFERENCE
Minutes of Meeting
Tuesday, November 30, 2004
Senate Hearing Room 1 - lO:OO a.m.
Chairman Martin called the meeting to order at lO:03 a.m. and attendance was noted by the
secretary.
Members Present
Senator Brown
Senator Garcia
Senator Harper
Senator Martin, Cochair
Senator Jarrett
Members Absent
Speakers Present
Representative Reagan
Representative Yarbrough
Representative Huffman, Cochair
Representative Clark
Representative Jackson
Sean Laux, Research Analyst, Senate Family Services Committee
Carol West, Member, Tucson City Council; Vice Chair, Municipal Tax Code Commission
Dot Reinhard, Auditor General's Office
David Patterson, Finance Director, Gila County
Ruben Medina, Executive Director, Arizona State Board of Tax Appeals
Sean Laux, Research Analyst, Senate Family Services Committee, reviewed the responsibilities
of the Committee of Reference (COR). He noted that sunset hearings will be conducted on the
Arizona State Board of Tax Appeals (BOTA) and the Municipal Tax Code Commission
(MTCC), as well as a non-sunset audit of the Gila County Transportation Excise Tax.
Sunset of the Municipal Tax Code Commission
Carol West, Member, Tucson City Council; Vice Chair, Municipal Tax Code Commission,
provided historical background on formation of the MTCC. She stated that the oversight role of
the MTCC has provided a check against inconsistent changes to the Model City Tax Code by
SENATE FINANCE AND HOUSE WAYS AND MEANS
COMMITTEE OF REFERENCE
November 30,2003
individual cities and towns, as well as a forum for the business community to comment upon
proposed changes and suggest changes of their own. The MTCC meets only when necessary and
operates at essentially no cost to the State, except for minimal staffing by the Arizona
Department of Revenue (DOR). Recognizing the great importance of the local sales tax as a
revenue source for all cities and towns in Arizona, she believes the Commission should be
continued. The MTCC gives the business community a place to object or voice concerns about
this local tax, and consistency in changes to the code, while preserving local authority over the
most important local revenue source.
Mr. Huffman moved that the Committee make a recommendation to
continue the Municipal Tax Code Commission for an additional 10 years.
The motion carried.
Audit on the Gila County Transportation Excise Tax
Dot Reinhard, Auditor General's Office, reviewed the audit performed on the Gila County
Transportation Excise Tax (Attachment 1).
Senator Brown remarked that the funds were not necessarily spent illegally, but for the public
benefit, and cautioned against over-regulating.
Senator Martin stated that he is especially concerned about the gifts with public monies and
suggested that the Committee meet again during the next interim to make sure the
recommendations are implemented.
Senator Brown noted that the problems were corrected and changes were made. Also, the
Auditor General's Office would let the Members know if the recommendations are not
implemented.
Ms. Reinhard indicated to Mr. Yarbrough that the County agreed to determine the amount of
inappropriate expenditures and compare those against indirect costs for that particular fund
because monies were not transferred to the General Fund for indirect service costs. The County
believes the amount of inappropriate expenditures would be less than the amount that should
have been transferred to the General Fund for indirect costs. If that is the process the County
took to implement that recommendation, it would have to be looked at, but she made the
recommendation that going forward the County should follow appropriate accounting procedures
and transfer that money to the General Fund for indirect service costs. As far as remedies, in the
past the Attorney General's Office was involved in cases where counties inappropriately used
excise tax monies and agreements were established to reimburse the funds appropriately.
Senator Martin asked about non-public groups that received monies. Ms. Reinhard responded
that has not yet been determined, but there is the potential of expenditures that violate public
monies where she does not believe the General Fund could be used to reimburse the Road Fund.
At this point, she is not sure how those would be handled.
Senator Martin could not recall the statutory penalty, but submitted that it is fairly severe.
SENATE FINANCE AND HOUSE WAYS AND MEANS
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November 30, 2004
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David Patterson, Finance Director, Gila County, stated that he does not know how the auditors
came up with 11 percent in questionable costs. Originally, the auditors conducted a random
sample over three years, pulling 40 items per year, and found one item that was questionable.
Based on that, the auditors said it was an attribute sampling versus a variable sampling, but he
does not believe 1 item out of 120 equates to 11 percent questionable items. The auditors then
started doing judgmental samples, and when that is done, specific items are looked for, and those
cannot be projected to the population as a whole. Some of the items that were questioned are not
that significant, although they are against the statutes. For example, $500 for Kids Voting out of
$2.5 million for one year and $48 for flowers from the community for someone's funeral. The
Board of Supervisors was notified that those kinds of decisions cannot be made without
identifying that it is for the betterment of the community and initialing the request. The County
is in the process of correcting those items.
Senator Martin remarked that using money from the transportation plan for the public good
becomes problematic no matter the amount. He requested the specifics of changes that need to
be made, the illegal or inappropriate expenditures, and the plan detailing the fix.
Mr. Patterson indicated to Ms. Reagan that he is not opposed to a review by the Auditor General
in six months, but the presentation by the Auditor General's Office implied that the issue is more
horrendous than it actually is. In fact, the funds were spent inappropriately; however, he believes
the $500 donated to Kids Voting should be allowable. The only problem was that the supervisor
did not initial the request, but believed it was in the best interest of the community to make the
donation.
Ms. Reagan commented that if the Auditor General's findings are somewhat inflated, perhaps
another audit would help clear the County's name.
Mr. Patterson advised Senator Martin that Kids Voting is not necessarily beneficial to
transportation as it is to the community, but it was not public money given to a private charity
that had no benefit to the community. It was not appropriate to be part of the transportation tax,
but that is something that has been changed. At one time, the County had three road crews that
were consolidated into one public works. Constituent Services was paid out of the Road Fund,
but that was offset by what the County considers chargeable indirect costs. A decision was made
that was inappropriate because the two could not be identified, so Constituent Services was
pulled from the Road Fund and put into the General Fund where the County began charging the
indirect costs. The County is in the process of making things more compartmentalized, which is
also why a new financial accounting system will be implemented in January 2005.
Mr. Huffman stated that a memo from Mr. Nelson, the current County Manager, states that he
agrees to all of the sample inappropriate expenditures amounting to over $46,000, the County
needs to improve the auditing process, and there may actually be more than $46,000 that the
County is attempting to identify and develop potential solutions.
Senator Martin stated that he appreciates the efforts that have been made, and therefore, does not
recommend any action on the Legislature's behalf this session, but he would like to follow-up
SENATE FINANCE AND HOUSE WAYS AND MEANS
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November 30, 2004
3
with the Auditor General's Office and possibly hold another Committee meeting if the issues
have not been worked out and reimbursement made.
Sunset of the Board of Tax Appeals
Ruben Medina, Executive Director, Arizona State Board of Tax Appeals, conveyed that he has
been in this position since BOTA was created in 1974 and has handled many thousands of tax
appeals in all areas of taxation. The sunset review report submitted to the COR on
September 1, 2004 addresses all of the factors requested by the Committee. The Board consists
of three members and staff includes himself, a hearing officer, and a secretary. There were
previously five full-time employees, but now there are only three due to budget reductions. The
caseload can only be handled because of a decrease in cases from previous years.
He stated that the type of cases that are heard are generally very complex after having gone
through various appeals at DOR and the Office of Administrative Hearings (OAR), which
handles sales and use tax type cases; however, BOTA has a very well qualified board of
professionals. He conveyed that the number of months to process appeals was reduced from
seven-and-a-half in 1999 to four-and-a-half presently. BOTA makes decisions within 30 days
that are disseminated throughout the country because requests are constantly made since many
times the decisions address issues of first impression. In 2002, BOTA completely revised the
rules and procedures, shortening the appeals process.
He anticipated additional appeals to be filed, not only later this fiscal year, but next fiscal year,
mainly because of a $6.5 million appropriation by the Legislature to DOR for the revenue­generating
program. With that, an additional 153 FTEs were appropriated, which will cause
more audits and protests to DaR, and eventually, more appeals to BOTA. If additional funding
is needed for another hearing office, a supplemental may be requested from the Joint Legislative
Budget Committee, but until that happens, additional funding will not be requested.
He indicated to Ms. Reagan that BOTA rules for DaR about 80 percent of the time. From
tracking through the Attorney General's Office, the courts upheld BOTA's decisions about
90 percent of the time.
Mr. Huffman moved that the Committee recommend continuation of the
Board of Tax Appeals for an additional 10 years. The motion carried.
Without objection, the meeting adjourned at 10:48 a.m.
(Original minutes, attachment, and tape are on file in the Office of the Chief Clerk.)
SENATE FINANCE AND HOUSE WAYSAND MEANS
COMMITTEE OF REFERENCE
November 30, 2004
4
Agency Response
ARIZONA BOARD OF TAX APPEALS
100 North 15th Avenue - Suite 140
Phoenix, Arizona 85007
602.364.1102
September 1, 2004
Dean Martin,
State Senator
Chair, Senate Finance Committee of Reference
Re: Sunset Review Process
Dear Senator Martin:
As requested, the State Board of Tax Appeals submits this report addressing each of the factors
listed in your letter dated July 30, 2004.
Should you or the Committee of Reference need additional information or have any questions,
please contact this office.
Sincerely,
.,/)
~- W\~_
Ruben M. Medina
Executive Director
cc
Members, Committee of Reference
1.
THE OBJECTIVE AND PURPOSE
IN ESTABLISHING THE AGENCY.
The Arizona State Board of Tax Appeals (the "Board") was established in July of 1974 to provide
taxpayers, which includes individuals, small businesses, corporations and municipalities with the
benefits of an independent, effective and inexpensive opportunity to appeal decisions of the
Arizona Department of Revenue (the "Department") without the burdens commonly associated
with court proceedings.
2.
THE EFFECTIVENESS WITH WHICH THE AGENCY
HAS MET ITS OBJECTIVE AND PURPOSE AND THE
EFFICIENCY WITH WHICH IT HAS OPERATED.
Throughout the years, the Board has successfully fulfilled its mission to afford taxpayers access
to expertise in a fair and impartial venue at minimal cost.
The Board is a quasi-judicial agency that is not in any way sUbject to the supervision or control of
the Department. Its three governor-appointed and senate-confirmed members serve six-year
terms. They are highly qualified professionals selected on the basis of their knowledge and
experience in the field of taxation and recognized by the Arizona Court of Appeals as tax
experts.1 The Board imposes no filing fees on taxpayers while adjudicating all appeals before it
involving income, estate, transaction privilege, use and luxury taxes, the award of attorney fees
and costs and any other matter of taxation assigned to it by law from decisions of the
Department and the Office of Administrative Hearings (the "OAHj.
The Board has effectively reduced the average number of months required to complete its
appeal process from a high of 15.5 months in FY 1996 to 7.5 months by 1999 - the time of the
last sunset review. Through a complete revision of its rules in 2002, the Board has streamlined
its appeal procedures, further reducing the process by two months. Taxpayers can currently
complete the appeals process before the Board in 4.5 months. In FY 1996, the Board had a
backlog of 97 decisions to be written. There currently is no backlog and decisions are generally
issued no more than 30 days after a hearing. See Attachment 4 for samples of decisions.
3.
THE EXTENT TO WHICH THE AGENCY HAS
OPERATED WITHIN THE PUBLIC INTEREST.
In its practices and procedures, the Board strives always to operate within the public interest.
It complies with all statutes governing open meetings and the disclosure of public records. See
Attachment 3 -- Minutes.
The Board's decisions are widely disseminated throughout the country by various publishing
companies including Lexis, Commerce Clearing House and Prentice Hall. Additionally. the Board
provides copies of its decisions from both taxpayers and taxing authorities upon reasonable
request.
Neither the Department nor OAH publish their decisions, and the extensive workload of the
Arizona Tax Court greatly limits the number of written decisions it issues in the non-property tax
areas regularly addressed by the Board. Therefore, the Board's published decisions provide
1 An attorney and two certified public accountants currently comprise the Board.
much-needed guidance to taxpayers, tax practitioners and taxing authorities, local and across
the country, especially concerning issues of first impression.
The Board and its staff regularly participate in pertinent local tax seminars and review tax
publications and court decisions to track current trends and recent developments in the field of
taxation.
4.
THE EXTENT TO WHICH RULES ADOPTED BY
BY THE AGENCY ARE CONSISTENT WITH
THE LEGISLATIVE MANDATE.
In order to best fulfill its legislative mandate, the Board completed a thorough revision of its rules
in 2002.
There had been significant changes in the statutes governing the tax appeals process
(A.R.S. §§ 42-1252 and 1253) since the administrative rules were last reviewed. Beginning in
August of 1995, the Board no longer consists of Division One and Division Two. Division
One has become the State Board of Equalization. The former Division Two is now known as
the State Board of Tax Appeals. The Board may now hear appeals from the Office of
Administrative Hearings, which was created effective October 1, 1995, in addition to those
from the Arizona Department of Revenue. Where the amount in dispute before the Board is
less than twenty-five thousand dollars, a taxpayer may now be represented by a certified
public accountant, a person enrolled to practice before the United States Internal Revenue
Service and recognized as an enrolled agent, or any other person who is authorized by the
taxpayer under a properly executed power of attorney and who was previously or is currently
retained by the taxpayer for purposes other than representation in a hearing before the
Board.
Due to the significant statutory changes and the attendant changes in the Board's policies
and practices, all of the Board's rules were repealed and replaced with new sections
reflecting the changes. Additionally, any mistakes in grammar, spelling, style or punctuation
existing in the text of the repealed statutes were corrected when incorporated into the new
rules, and a definitional section was added. Finally, to optimize the effectiveness of the
rules, changes were made to improve the clarity, conciseness and understandability of the
rules.
5.
THE EXTENT TO WHICH THE AGENCY HAS ENCOURAGED
INPUT FROM THE PUBLIC BEFORE ADOPTING ITS RULES
AND THE EXTENT TO WHICH IT HAS INFORMED THE
PUBLIC AS TO ITS ACTIONS AND THEIR EXPECTED
IMPACT ON THE PUBLIC.
During the course of its rule revision, the Board specifically sought input from those in the tax
community who regularly appear before the Board and are most affected by its actions. Copies
of proposed rules were disseminated to members of the Arizona Society of Certified Public
Accountants, the Arizona Society of Public Accountants, the Tax Section of the Office of the
Attorney General, and tax attorneys.
The Board reviewed all suggestions and comments it received, addressed any concerns noted
and made revisions to the proposed rules when appropriate. The Board properly posted all
2
public notices and held public hearings, and the rules became final after the Governor's
Regulatory and Review Council ("GRRC") approved them.
6.
THE EXTENT TO WHICH THE AGENCY HAS BEEN ABLE
TO INVESTIGATE AND RESOLVE COMPLAINTS THAT
ARE WITHIN ITS JURISDICTION.
The Board has received one complaint since the last Sunset Review. A taxpayer, who declined
to appear at an oral hearing before the Board, complained that the Board did not sufficiently
understand the written materials submitted to it and upon which it based its decision in favor of
the Department. The taxpayer contended that the validity of this complaint was confirmed when
the Department decided to settle with the taxpayer rather than pursue the matter in Tax Court.
The Assistant Attorney General representing the Department explained to the taxpayer in writing
that the settlement was offered because the relatively small amount in dispute did not justify the
cost in time and expense required to continue to Tax Court. Nevertheless, the taxpayer filed
complaints with the Department, with the State Bar of Arizona against the Assistant Attorney
General., and -- after an exchange of correspondence on the matter with the Board dating back
to 1995 -- the taxpayer eventually filed an appeal with GRRC concerning the Board's rules. The
petition to GRRC specifically addressed the taxpayer's objection to the Board's lack of a rule
governing the burden of proof in proceedings before it.
The Board's original burden of proof rule, R16-3-118 of the Arizona Administrative Code
("A.A.C.") provided that the burden of proof as to all issues of fact was on the taxpayer. This rule
complied with the standard of proof established by case law in Arizona State Tax Commission v.
Kieckhefer.2
Prior to submitting its last rule-making package, the Board considered developing a new rule
shifting the burden of proof to the Department under certain specified conditions. The Board's
consideration was prompted by its desire, in an attempt to establish a standard burden, to be
consistent with the rule change adopted by the Tax Court. The Board invited comment on this
proposed rule from parties potentially affected by the change. The Department objected to the
change, and the Board was advised by counsel for GRRC that it would oppose such a change
and advise members of the Council to reject the Board's rule-making package in its entirety.
The Board proceeded with the remainder of the rule-making package, allowing R16-3-118 to
expire. After the Board's rules were approved and finalized, the Board reviewed the expiration of
rule R16-3-118. After considering the fact that, absent a duly approved rule to the contrary,
Kieckhefer established the standard of proof before the Board, and taking into account the rule­making
guidelines proscribing the incorporation into agency rules of requirements already
established outside of the rule, the Board chose not to attempt to circumvent these guidelines by
promulgating a new, redundant rule.
The issue was finally successfully resolved April 16, 2004 when the governor signed legislation
addressing the burden of proof in hearings before the Board.3 Appellant withdrew his appeal on
April 20, 2004.
2 "The presumption is that an additional assessment of income tax is correct, and the burden is on the
taxpayer to overcome such presumption." Arizona State Tax Commission v. Kieckhefer, 67 Ariz. 102, 191
P.2d 729 (1948).
3 A.R.S. § 42-1255 provides, in part, that "[t]he Department has the burden of proof by a preponderance of
the evidence in any administrative or judicial proceeding regarding any factual issue that is relevant to
ascertaining the tax liability of a taxpayer. This section does not abrogate any provision of this title or title
43 that requires a taxpayer to substantiate an item of income or expense."
3
7.
THE EXTENT TO WHICH THE ATTORNEY GENERAL OR ANY
OTHER APPLICABLE AGENCY OF STATE GOVERNMENT
HAS THE AUTHORITY TO PROSECUTE ACTIONS
UNDER THE ENABLING LEGISLATION.
The Board is not a regulatory agency. The Office of the Attorney General represents the
Department in appeals before the Board but neither the Attorney General nor any other State
agency prosecutes actions under the Board's enabling legislation.
8.
THE EXTENT TO WHICH THE AGENCY HAS ADDRESSED
DEFICIENCIES IN THEIR ENABLING STATUTES WHICH
PREVENTS IT FROM FULFILLING ITS STATUTORY MANDATE.
There are no deficiencies in the statutes governing the Board that have prevented it from
fulfilling its statutory mandate. Statutory changes have been enacted to assist the Board in best
fulfilling its statutory mandate. Until 1997, practice before the Board was limited to licensed
attorneys. In 1997, legislation was enacted to permit CPAs and agents enrolled before the
Internal Revenue Service to practice before the Board when disputes involve less than $5,000.
A.R.S. § 42-1253(0) (formerly A.R.S. § 42-172(0». In 1998, the legislature further amended the
statute to extend non-attorney representation to any other person authorized by the taxpayer
under a properly executed power of attorney who was previously or is currently retained by the
taxpayer for purposes other than representation in a hearing before the Board. The amendment
also raised the economic threshold requirement for all non-attorney representation to $25,000.
Any attorney who is either a member of the Board or staff hearing officers employed by the
Board, as well as Assistant Attorney Generals representing the Department before the Board
could not function in accordance with this legislation without running afoul of the Code of
Professional Responsibility, which prohibits attorneys from assisting or contributing to the
unauthorized practice of law. Therefore, the Board petitioned the Arizona Supreme Court asking
it to amend Rule 31 of the Rules of the Supreme Court governing attorneys to specifically allow
non-attorneys to practice before the Board. The Court adopted a rule allowing CPAs and
enrolled agents to practice before the Board.
9.
THE EXTENT TO WHICH CHANGES ARE NECESSARY TO
ADEQUATELY COMPLY WITH THE FACTORS LISTED IN THIS
SUBSECTION.
Although there are no deficiencies in the statutes governing the Board that have prevented it
from fulfilling its statutory mandate, the amendment of Rule 31 of the Rules of the Supreme
Court may require future revision to A.R.S. § 42-1253.
Although the Arizona Supreme Court amended Rule 31 to allow CPAs and enrolled agents to
practice before the Board's attorneys, it did not address the final class of non-attorney
representation permitted under A.R.S. § 42-1253(0)(3), i.e., representation by any other person
authorized by the taxpayer under a properly executed power of attorney who was previously or is
currently retained by the taxpayer for purposes other than representation in a hearing before the
Board.
4
Nevertheless, the Board intends to fulfill the legislative mandate of the statute. If at any time it
becomes necessary for an attorney seNing the Board to be recused from participating in any
proceeding, the remaining quorum of the Board will conduct the hearings and write the decisions
in these cases.
10.
THE EXTENT TO WHICH THE TERMINATION OF THE
AGENCY WOULD SIGNIFICANTLY HARM THE
PUBLIC HEALTH, SAFETY OR WELFARE.
The elimination of the Board would significantly and detrimentally impact taxpayers. The Board
provides an inexpensive, informal and impartial venue in which taxpayers can represent
themselves in most cases. Taxpayers may also be represented before the Board by CPA's,
enrolled agents or other authorized individuals, as well as attorneys. There are no filing fees, the
rules of evidence are relaxed and Appellants are afforded a non-intimidating atmosphere in
which they have the opportunity to fully state their positions and present their evidence. The
Board provides a review of appeals completely independent from the Department by highly­qualified
Board members, hearing officers and staff that work exclusively with tax matters. The
Board is the only State agency that issues written decisions that are published and provide
guidance to taxpayers.
The elimination of the Board would significantly and detrimentally impact the Arizona Superior
Court. The elimination of the Board would significantly increase the already heavy caseload of
the Arizona Tax Court, which is a division of the Superior Court. This would certainly result in
even fewer and less timely decisions being issued in non-property tax cases.
The elimination of the Board would significantly and detrimentally impact taxpayer
representatives, the Department and taxing authorities across the country who look to the
Board's decisions for guidance on tax issues.
11.
THE EXTENT TO WHICH THE LEVEL OF REGULATION
EXERCISED BY THE AGENCY IS APPROPRIATE AND
WHETHER LESS OR MORE STRINGENT LEVELS OF
REGULATION WOULD BE APPROPRIATE.
This inquiry does not apply to the Board. The Board is not a regulatory agency.
12.
THE EXTENT TO WHICH THE AGENCY HAS USED PRIVATE
CONTRACTORS IN THE PERFORMANCE OF ITS DUTIES
AND HOW EFFECTIVE USE OF PRIVATE CONTRACTORS
COULD BE ACCOMPLISHED.
The Board has not used private contractors to perform its duties, nor has it sought funding to do
so. Private contractors could not perform the duties of the Board members who are appointed
by the governor. In addition to the Executive Director and the Board Secretary, the Board
employs a hearing officer. The hearing officer is an attorney and full-time State employee who
conducts legal research, presides over hearings, writes proposed decisions, revises rules and
generally assists the Executive Director in the administration of the agency. It would neither be
practical nor cost-efficient to utilize private contractors for these duties. Neither would the
requisite level of expertise be generally available among private contractors.
5
ADDITIONAL REQUESTED INFORMATION
1. DESCRIBE THE ROLE AND FUNCTION OF THE AGENCY, INCLUDING MAJOR
ACTIVITIES/PROJECTS, ACCOMPLISHMENTS AND OBSTACLES TO SUCCESS.
As previously addressed, the Board provides an inexpensive, independent, informal and
impartial venue in which taxpayers can be represented before an experienced tax tribunal by
themselves (in most cases), CPA's, enrolled agents, other authorized individuals or attorneys.
The published decisions of the Board provide guidance to taxpayers within and without the State
of Arizona.
The Board successfully completed the thorough revision of all its rules, and effectively petitioned
the Arizona Supreme Court to amend Rule 31 to allow non-attorneys to practice before the
Board.
The Board has reduced the average number of months required to complete its appeal process
from a high of 15.5 months in FY 1996 to 4.5 months. There is currently no backlog and
decisions are generally issued no more than 30 days after a hearing.
Like all state agencies, the Board has had to work within tight bUdget constraints. This can
present an obstacle to the Board's efforts to maintain a timely and efficient appeals process.
For FY 2004-2005, the Department was appropriated additional funding for the revenue
generating program in the amount of $6,537,000 and 153 FTE positions. The additional audits
and protests this appropriation will facilitate will certainly impact the Board's caseload. The
potentially dramatic increase in appeals to the Board may necessitate the full funding of the
additional hearing officer position that is currently vacant.
Budget limitations may also prevent the Board from remaining current in the area of information
technology. The Board is researching the feasibility of creating a website affording interested
parties with easier access to the Board's forms, rules and decisions. The cost of the requisite
software and computer upgrades may delay this project for some time.
2. PROVIDE DETAILED FINANCIAL DATA, INCLUDING BUT NOT LIMITED TO: NUMBER OF
FULL-TIME EMPLOYEES, DETAILED EXPENDITURES,IDENTIFY AND QUANTIFY ALL
REVENUES AND FEE STRUCTURE (IF APPLICABLE) FROM EACH FUND SOURCE.
See Attachment 2 for financial data.
Any revenue generated by the Board is minimal and wholly attributable to funds received for
providing copies of Board records and hearing tapes. These funds totaled $0.1 in FY 2002 ­2003
and $0.0 in FY 2003 - 2004.
3. AN IDENTIFICATION OF THE PROBLEM OR THE NEEDS THAT THE AGENCY IS
INTENDING TO ADDRESS.
As previously addressed in section 1 above, the Board may need to address the consequences
created by a significantly increased caseload and the need for IT updates with limited available
resources.
6
4. A STATEMENT, TO THE EXTENT PRACTICABLE, IN QUANTITATIVE AND QUALITATIVE
TERMS, OF THE OBJECTIVES OF THE AGENCY AND ITS ANTICIPATED
ACCOMPLISHMENTS.
See Attachment 2.1-Strategic Plan
5. AN IDENTIFICATION OF ANY OTHER AGENCIES HAVING SIMILAR, CONFLICTING OR
DUPLICATIVE OBJECTIVES, AND AN EXPLANATION OF THE MANNER IN WHICH THE
AGENCY AVOIDS DUPLICATION OR CONFLICT WITH OTHER SUCH AGENCIES.
To some extent, the Board's objectives may overlap with those of the Department and the OAH.
However, the Board is a quasi- judicial agency, the decisions of which, unlike the Department
and the OAH, are not subject to further administrative review. Board decisions are appealable
only to the Tax Court, which is part of the Superior Court. The Department's main objective is to
administer and enforce the State's tax laws, while that of the OAH may be to provide uniform
hearing process among State administrative agencies. The Board's principle objective, however,
is to provide taxpayers with a fair and financially feasible opportunity for representation before a
tribunal of focused tax experts. These professionals are experienced in the field of taxation and
are fellow citizens appointed by the governor - not salaried state employees. Thus, the
objectives of the agencies are not truly duplicative.
6. AN ASSESSMENT OF THE CONSEQUENCES OF ELIMINATING THE AGENCY OR OF
CONSOLIDATING IT WITH ANOTHER AGENCY.
The purpose and objective of the Board and its service to the public interest is thoroughly
addressed in the sunset review, and the consequences of the void created if the Board were to
be eliminated are clear. The distinctive and focused function of the Board does not permit its
consolidation with another agency.4
4The possible consolidation of the Board was previously considered and rejected by the Joint study
Committee on Regulatory Reform and Enforcement.
7
Enabling Statute & Board Rules
42-1251 TAXATION 1058
may be returned at any time before the expiration of nine
months from the date of such levy.
D. In its discretion and at any time, the department may
release a levy or return property levied on if the department'
determines that any of the following conditions applies:
1. The levy was premature or otherwise in violation 'of the
department's administrative procedures.
2. The ta.xpayer has entered into an installment payment
agreement, unless the agreement provides otherwise.
3. The department's interests are best served by the release
or return. 1999
ARTICLE 6. TA.\: APPEALS
42·1251. Appeal to the department; hearing
A. Except in the case of individual income ta.\:es, a person
from whom an amount is determined to be due under article 3
of this chapter may apply to the department by a petition in
writing within forty-five days after the notice of a proposed
assessment made pursuant to section 42-1109, subsection B or
the notice required by section 42-1108, subsection B is re­ceived,
or within such additional time as the department may
allow, for a hearing, correction or redetermination of the
action taken by the department. In the case of individual
income ta.\:es the period is ninety days from the date the notice
is mailed. The petition shall set forth the reasons why the
hearing, correction or redetermination should be granted and
the amount in which any ta."{, interest and penalties should be
reduced. If only a portion of the deficiency assessment is
protested, all unprotested amounts of ta."{, interest and penal­ties
must be paid at the time the protest is filed. The
department shall consider the petition and grant a hearing, if
requested. To' represent the ta."{payer at the hearing or to
appear on the ta.\:payer's behalf is deemed not to be the
practice of law.
B. If the ta.~ayer does not file a petition for hearing,
correction or redetermination within the period provided by
this section, the amount determined to be due becomes final at
the expiration of the period. The ta."{payer is deemed to have
waived and abandoned the right to question the amount
determined to be due, unless the ta.\:payer pays the total
deficiency assessment, including interest and penalties. The
ta."{payer may then file a claim for refund pursuant to section
42-1118 within six months of payment of the deficiency assess­ment
or within the time limits prescribed by section 42-1106,
whichever period expires later.
C. All orders or decisions made on the filing of a petition for
a hearing, correction or redetermination become final thirty
days after notice has been received by the petitioner, unless
the petitioner appeals the order or decision to the state board
ofta."{ appeals. 199i
(See Arizona Annotation Seruice)
42·1252. State board of ta."'I: appeals
A. The state board of ta.\: appeals is established as an
independent agency which shall not in any way be subject to
the superrision or control of the department of revenue. The
board shall have full power to hear and decide all appeals from
decisions of the department of revenue.
B. The state board shall consist of three members ap­pointed
by the governor pursuant to section 38-211. Members
shall be residents of this state.
C. Members shall be selected on the basis of their knowl­edge
of and experience in ta."{ation. Not 'more than two
members may be primarily engaged in the same occupation or
profession. The board shall handle all matters entrusted by
law to it dealing with income tuation, estate ta.,;ation, trans·
action privilege, use and lu:cury ta.ution and•. any other
ta.,;ation assigned to it by law and shall hear and decide
appeals from the department of revenue on such matters.
D. Not more than two members of the board shall be
members of the same political party. No member of the board
shall hold any other public office under the laws of this state or
any ofits political subdivisions. No member shall be a candi.
date for an elective office under the laws of this state, nor of
any other state. No member of the board shall hold any
position of trust nor provide or engage in any occupation or
business which would corruptly conflict with the duties of a
member of the board, nor take part directly or indirectly in
any election campaign in the interest of any political party or
other organization or any candidate or measure to be voted on
by the people. This subsection does not prohibit a person from
properly and lawfully engaging in a business or profession.
E. The term of board members is six years. The member of
the board having the shortest term remaining shall act as
chairperson if that member has served on the board at least
two years. If the member ha\-ing the shortest term remaining
does not qualify to act as chairperson or if two or more
members have an equal right by virtue of their remaining
terms to serve as chairperson, the board shall elect a chair­person.
A melJ1ber may not be appointed for more than two
terms.
F. Each member of the board sh:lll receive:
1. One hundred fifty dollars per day for time spent in the
perform:lnce of official duties.
2. Such travel and other expenses as pro\-ided by law for
other state officers.
G. The governor may remove any member for cause.
R. The board shall appoint a clerk, hearing officers and
such other employees as it deems necessary to carry out its
duties. The hearing officer qualifications shall be the same as
the selection criteria for the members as prescribed by this
section. Notwithstanding section 41-192, subsection E, upon
request of the board, the attorney general shall designate, for
such time and purposes as the board requires, -an attorney,
acceptable to the board, whose compensation shall be fixed
and paid by the board.
I. The board shall hold hearings and meetings at the call of
the chairperson or a majority of the board and otherwise as
may be prescribed by the rules of the board as required to
carry out its duties. The principal office of the board shall be at
the capitol, but the board may sit or hold hearings at any other
place within the state. A majority of the board constitutes a
quorum for making orders and decisions or transacting other
official business, and the board may act even though one
position on the board is vacant. The board shall keep a record
of its proceedings.
J. In conducting the business of the board:
1. The board may not act if more than one position is
vacant.
2. One or more members or a hearing officer of the board
may hold hearings and take testimony to be reported for
action by the board when authorized by rule or order of the
board. 1997
42-1253. Appeal to state board or ta."C appeals; defini-tion
A. Except as provided in section 42-1254, Subsection C, a
person aggrieved by a final decision or order of the department
under section 42-1251, Article 3 of this chapter or section
42-2065,42-2068,42-2069,42·2074.42-2201 or 42·2202 may
appeal to the state board of ta.\: appeals by filing a notice of
appeal in writing within thirty days after the decision or order
from which the appeal is taken has become final.
B. The board shall take testimony and examine documen·
tary evidence as necessary to determine the appeal, all pur·
suant to administrative rules to govern such appeals.
1059 TA.XPAYER PROTECTION AND SERVICES 42·1254
ARTICLE 2. TAXPAYERS' BILL OF RIGHTS
ARTICLE 1. COr-.'"FIDENTIALIIT OF TAXPAYER
lNFO&.'rL<\TION
CHAPTER 2
TAXPAYER PROTECTION AND SERVICES
ta.,,< and then file' a claim for refund of the ta."<es paid. The
. refund claim shall then be governed by section 42-1119 and
this section.
3. The tax court shall hear and determine the appeal as a
trial de novo.
4. The department has the burden of proof by a preponder·
ance of the e\;dence in any court proceeding regarding any
factual issue relevant to ascertaining the tax liability of a
ta.'l:payer. This paragraph does not abrogate any provision of
this title or title 43 that requires a ta.'l:payer to substantiate an
item of income or expense. This paragraph applies to a factual
issue if a preponderance of the evidence demonstrates that:
(a) The ta."<payer asserts a reasonable dispute regarding the
issue. .
(b) The ta."<payer has fully cooperated with the department
regarding the issue including pro\;ding, within a reasonable
period of time, access to and inspection of all witnesses,
information and documents within the ta.,,<payer's control, as
reasonably requested by the department.
(c) The ta."<payer has kept and maintained records as reo
quired by this title, title 43 or the department. .
5. Either party to such action may appeal to the court of
appeals or supreme court as pro\;ded by law.
6. If a final judgment is rendered in favor of the ta."<payer in
the action, the amount or such portion of the judgment as may
be necessary shall first be credited to any ta."<es, penalties and
interest due from the.plaintiffta.'l:payer, and the amount of the
balance remaining due the ta.,,<payer shall be certified by the
department of revenue to the department of administration,
with a certified copy of the~final judgment and.a claim for
refund authenticated by the department of re\'enue. On re­ceipt,
the department of administration shall draw a warrant
payable to the ta.'l:payer in an amount equal to the amount of
the ta.,,< found by the judgment to be illegal, less the amount of
any ta."<es, penalties and interest due from the ta."<payer. The
department ofadministration shall draw a separate warrant
payable to the ta.'l:payer in an amount equal to the interest and
other costs recovered against the department of revenue by
the judgment, which shall be paid from the appropriate ta.,,<
account. 2000
(See Arizona Annotation Service)
Definitions.
Disclosure of confidential information prohibited.
Authorized disclosure of confidential information.
violation: classification.
Arizona ta.'Cpayer assistance office; ta.'Cpayer problem res·
olution officer; duties.
Erroneous advice or misleading statements by the depart.
ment; abatement of penalties and interest; definitions..
Procedures involving ta.'Cpayer interviews.
Disclosure of ta.xpayer information.
Ta.'Cpayer assistance orders.
Closing agreements in cases of extensive taxpayer misun·
derstanding or misapplication; attorney general ap·
proval; rules.
Agreement for installment payments of tax.
Basis for evaluating employee performance.
No additional audits or proposed assessments; exceptions.
42·2057.
42·2058.
42·2059.
42·2051.
42·2053.
42·2054.
42·2055.
42·2056.
42·2052.
Section
42·200l.
42-2002.
42·2003.
42·2004.
C. On determining the appeal the board shall issue a
decision consistent with its determination. The board's deci­sion
is final on the expiration of thirty days from the date
when notice of its action is received by the taxpayer, unless
either the department or the ta.'l:payer brings an action in ta.,,<
court as provided in section 42-1254.
D. If the amount in any single dispute before the board is
less than t......enty·five thousand dollars, a ta.'l:payer may be
represented in that dispute before the board by:
1. A certified public accountant.
2. A person who is enrolled to practice before the United
States internal revenue service and is recognized' as an
enrolled agent.
3. Any other person who is authorized by the ta.'l:payer
under a properly executed power of attorney and who was
pre\;ously or is currently retained by the ta."<payer for pur­poses
other than representation in a hearing before the board.
E. If a practitioner who represents a ta.,,<payer before the
board pursuant to Subsection D of this section fails to comply
with an order or rule of the board, the board may impose
sanctions including one or both of the following:
1. Order that the stipulation of the facts proposed by the
department of revenue be accepted.
2. Suspend the practitioner from further practice before the
board either for a specific period of time or until the board
removes the suspension.
F. For the purposes of this section, "practitioner" means a
person, other than a party, who files documents with or
appears before the board in connection with a matter before
the board. 2001
(See Arizona Annotation Ser~'ice)
42·t254, Appeal to ta.~ coUt't
A.. The department or a ta."<payer aggrieved by a decision of
the state board of ta.,,< appeals may bring an action in ta.,,< court.
B. If the department is aggrieved by a decision of the board
and the amount in 'dispute is less than five thousand dollars,
the department may not bring an action in ta.,,< court unless
the department determines that the decision of the board
involves an issue of substantial significance to the state. A
ta."<payer aggrieved by a determination of the department that
an issue is of substantial significance to the state may file a
motion with the ta.,,< court to dismiss the action brought by the
department on the grounds that the determination constitutes
an abuse of discretion.
C. Except in the case of individual income tax cases in
which the amount in dispute is less than five thousand dollars,
a person who is aggrieved by a final decision or order of the
department under section 42-1251 or article 3 of this chapter
may, in lieu of appealing to the state board of ta.,,< appeals
under section 42-1253, bring an action in tax court by filing a
notice of appeal in writing within thirty days after the decision
or order from which the appeal is taken has become final.
D. Any appeal that is taken to ta.,,< court pursuant to this
section is subject to the following provisions:
1. No injunction, writ of mandamus or other legal or equi­table
process may issue in an action in any court in this state
against an officer of this state to prevent or enjoin the
collection of any tax, penalty or interest.
2. The action shall not begin more than thirty days after the
order or decision of the board or department becomes final.
Failure to bring the action within thirty days after the order or
decision of the board or department becomes final constitutes
a waiver of the protest and a waiver of all claims against this
state arising from or based on the illegality in the tax,
penalties and interest at issue, except that within the time
limits set forth in section 42-1106, a taxpayer who fails to
bring an action within thirty days may pay the -ta."l: under
protest stating the grounds of objection to the legality of the
Arizona Administrative Code
State Board ofTax Appeals - Luxury, Transaction Privilege (Sales), Use, Estate, Income
, TITLE 16. TAX APPEALS
CHAPTER 3. STATE BOARD OF TAX APPEALS
LUXURY, TRANSACTION PRIVILEGE (SALES), USE, ESTATE, INCOME
(Authority: A.R.S. �� 42-141 et seq.)
Title 16, Ch. 3
ARTICLE 1. TAX APPEAL PROCEDURES
ARTICLE 1. TAX APPEAL PROCEDURES
Rl6-3-101. Definitions
For purposes of this Article:
I. "Appellanl," unless otherwise noted, means a taxpayer or
the representative of a taxpayer, or other person or entity
directly interested who is legally entitled to initiate pro­ceedings
before the Board.
2. "Board" means the State Board ofTax Appeals.
3. "Clerk" means the Clerk appointed by the Board to carry
out the duties established by A.RS. § 42-1252.
4. "Commission" means the Municipal Tax Code Commis­sion.
5. "Day" means a calendar day. If the last day for filing a
document under the provisions of this Article falls on a
Saturday, Sunday, or legal holiday, the document is con­sidered
timely if filed on the folIowing business day.
6. "Department" means the Arizona Department of Reve­nue.
7. "Hearing Officer" means a person appointed by the
Board to take oral testimony and other evidence, make
recommendations, and carry out the duties of the Board
established by A.R.S. § 42-1252.'
8. "Memorandum" means a document that supports a
party's position.
9. "Notice ofappeal" means a written request for correction
or redetermination, including all applicable attachments.
10. "Notice of determination" means a written notification of
a final decision or order issued by the Department or any
other governmental entity from which an appeal to the
Board may be taken.
Section
RI6-3-101.
RI6-3-102.
RI6-3-103.
RI6-3-104.
RI6-3-105.
RI6-3-106.
RI6-3-107.
RI6-3-108.
RI6-3-109.
RI6-3-110.
RI6-3-111.
RI6-3-112.
RI6-3-113..
RI6-3-114.
RI6-3-115.
RI6-3-116.
RI6-3-117.
RI6-3-118.
RI6-3-119.
RI6-3-120.
RI6-3-121.
RI6-3-122.
RI6-3-123.
RI6-3-124.
RI6-3-125.
RI6-3-126.
Definitions
Notice of Appeal
Incomplete Notice of Appeal
Memoranda, Waivers, and Supporting Authorities
Stipulation or Statements of Fact
Dismissal, Withdrawal, or Suspension of Appeal
Request for Hearing
Hearing Procedure
Evidence Produced at the Hearing
Official Notice
Subpoena
Repealed
Transcripts and Records
Decision or Order
Rehearing or Review of Decision or Order
Renumbered
Repealed
Burden of Proof
Repealed
Repealed
Renumbered
Renumbered
Renumbered
Renumbered
Renumbered
Renumbered
II. "OAH" means Office of Administrative Hearings as
established by A.R.S. § 41-1092.01.
12. "Quorum" means two members of the Board.
13. "Supporting authorities" means cases and authorities
cited and relied on by a party.
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Amended effective January 7, 1977 (Supp. 77-1).
Amended effective August 27,1980 (Supp. 80-4). Sec­tion
repealed; new Section made by final rulemaking at 8
A.A.R. 836, effective February 7, 2002 (Supp. 02-1).
Rl 6-3-1 02. Notice of Appeal
A. The Appellant shall sign the notice of appeal and mail or
deliver the original and six copies to the Board's office in
Phoenix, Arizona. The Board shall consider a notice of appeal
received by mail filed on the date shown by its postmark. In
the absence of a legible postmark, the Board shall determine
whether an appeal was timely filed.
B. The Appellant shall legibly type, write, or print the notice of
appeal and include the following information:
1. The Appellimt's name, address, and telephone number. If
there is a difference betWeen the name on the notice of
determination and the name on the notice of appeal, the
notice ofappeal shall contain an explanation of the differ­ence;
2. The amount of money involved in the Department's
determination, the type of!a"{, the year or other period for
which the determination was made, and, if different from
the determination, the approximate amount of money at
issue in the appeal;
3. A statement of issues involved in the appeal;
4. A statement of errors the Appellant alleges the Depart­ment
committed in the determination;
5. The relief sought; and
6. Whether a hearing is requested. The AppelIant may
waive a previously requested hearing within 10 days after
the due date of the reply memorandum.
C. The Appellant shall file six copies of the notice of determina­tion
and any findings of fact or conclusions of law issued by
the Department or the OAH with the notice of appeal.
D. The Appellant shall file the notice of appeal not more than 30
days after the final decision or order of the Department or the
OAH becomes fmal.
E. In addition to the requirements in subsections (A) through (D),
a notice of appeal regarding reimbursement for fees or other
costs shall include six copies of the following:
1. The application that was submitted to the Department for
reimbursement of fees or other costs.
2. Documentation of payment offees or other costs.
F. If the notice of appeal is filed by a person aggrieved by an
order or decision of the Municipal Tax Code Commission, the
Appellant shall file a signed notice of appeal within 30 days
after receiving the Commission's notice of the order or deci­sion.
The notice ofappeal shall include the following informa­tion:
I. The name and address ofeach municipality;
2. The AppelIant's name, address, and telephone number;
3. The applicable tax rate ofeach municipality;
4. A statement of issues involved in the appeal;
March 31, 2002 Page I Supp.02-1
Title 16, Cb. 3 Arizona Administrative Code
State Board ofTax Appeals - Luxury, Transaction Privilege (Sales), Usc, Estate, Income
5. The reliefsought; and
6. Whether a hearing is requested.
G The Appellant shaH submit six copies of any municipal ordi­nance
involved in the appeal.
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Amended effective January 7, 1977 (Supp. 77-1).
Amended effective August 27, 1980 (Supp. 80-4). Sec­tion
repealed; new Section made by final rulemaking at 8
A.A.R. 836, effective February 7, 2002 (Supp. 02-1).
R16-3-103. Incomplete Notice of Appeal
A. If the Appellant files a timely notice of appeal that is incom­plete,
the Clerk shall grant the Appellant IS days to perfect the
appeal.
B. Upon written request, the Clerk shall grant the Appellant a rea­sonable
extension oftime to comply with the provisions of this
Section for good cause shown.
C. The Board may dismiss an appeal or exclude supplemental
information for the Appellant's failure to act in a timely man­ner.
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Amended effective January 7, 1977 (Supp. 77-1). Former
Section R16-3-103 renumbered and amended as Section
RI6-3-111, former Section RI6-3-105 renumbered and
amended as Section RI6-3-103 effective August 27,1980
(Supp. 80-4). Section repealed; new Section made by
final rulemaking at 8 AA.R. 836, effective February 7,
2002 (Supp. 02-1).
R16-3-104. Memoranda, Waivers, and Supporting Authori-ties
A. Each party shall file an original and six copies of any memo­randa
filed with the Board. The Board shall provide a copy to
the opposing party.
B. A party may waive in writing the right to file a memorandum
any time before the memorandum is due.
C. The Appellant shall file a memorandum of not more than IS
pages that addresses the facts and law in support of the appeal
within 20 days after filing the notice of appeal.
D. The Department shaH file a response memorandum of not
more than 15 pages within 20 days after receiving the Appel­lant's
memorandum or waiver.
E. The AppeHant may file a reply memorandum of not more than
10 pages within IS days after receiving the Department's
memorandum. The Appellant's reply memorandum shall only
address the issues of law or fact raised in the Department's
memorandum.
F. Each party shall file six copies of cited supporting authorities
at the time the party files a memorandum.
G Upon written request, the Board may grant a reasonable exten­sion
of time for filing a memoranda upon good cause shown.
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Amended effective January 7, 1977 (Supp. 77-1). Former
Section RI6-3-1 04 renumbered and amended as Section
RI6-3-112, former Sections RI6-3-106 and R16-3-107
renumbered and amended as Section RI6-3-104 effective
August 27,1980 (Supp. 80-4). Section repealed; new
Section made by final rulemaking at 8 A.AR. 836, effec-tive
February 7,2002 (Supp. 02-1).
R16-3-1OS. Stipulation or Statements of Fact
At the Board's request, the parties shall file a stipulation or separate
statements of fact with any supporting affidavits or exhibits, listing
the facts upon which they agree, the facts that are in dispute, and the
reasons for the dispute. [f there are no facts in dispute, this should
be stated in the stipulation or statements.
Historical Note
Adopted effective December 30,1974 (Supp. 75-1).
Former Section RI6-2-105 repealed, new Section RI6-3­105
adopredeffectiveJanuary7, 1977 (Supp. 77-1).
Former Section RI6-3-105 renumbered and amended as
Section R16-3-103, former Section RI6-3-108 renum­bered
and amended as Section RI6-3-105 effective
August 27,1980 (Supp. 80-4). Section repealed; new
Section made by final rulemaking at 8 A.AR. 836, effec­tive
February 7, 2002 (Supp. 02-1).
R16-3-106. Dismissal, Withdrawal, or Suspension of Appeal
A. [f the Board Iaeks jurisdiction regarding an appea~ the Board
shall dismiss the appeal on its own motion or on motion by the
Department
B. The Appellant may withdraw an appeal upon written notifica­tion
to the Board or by the parties' written stipulation at any
time before the Board issues its decision.
C. The Board may suspend proceedings for a reasonable period
of time at the written request ofeither party, the written stipu­lation
of the parties, or its own discretion.
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Former Section RI6-3-106 repealed, new Section RI6-3­106
adopted effective January 7,1977 (Supp. 77-1).
Former Section RI6-3-106 renumbered and amended as
Section R16-3-104, former Section RI6-3-109 renum­bered
and amended as Section RI6-3-106 effective
August 27,1980 (Supp. 80-4). Section repealed; new
Section made by final rulemaking at 8 A.A.R. 836, effec­tive
February 7, 2002 (Supp. 02-1).
R16-3-107. Request for Hearing
A. The Board shall schedule a hearing at the written request of
either party. Either party may waive appearance, in writing, at
least 10 days before the hearing.
B. A hearing officer or one or more members of the Board shall
hold the hearing, taking testimony and other evidence.
C. The Board shall send a written notice to the parties of the date,
time, and location of the hearing at least 20 days before the
hearing. The Board shaH ordinarily schedule one hour hear­ings.
Upon written request, and after consideration ofthe hear­ing
schedule, the Board may grant a party additional time for
the hearing if the request is filed with the Clerk within 10 days
after the due date of the reply memorandum,
D. The Board may postpone, continue, or cancel a hearing for
good cause upon the written request of either party if the
request is submitted at least 10 days before the hearing.
E. If a hearing is not requested, the Board shall consider the
appeal submitted for decision based on the record.
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Amended effective January 7,1977 (Supp. 77-1). Former
Section Rl6-3-107 renumbered and amended as Section
RI6-3-104, former Section R16-3-110 renumbered and
amended as Section RI6-3-107 effective August 27,1980
(Supp. 80-4). Section repealed; new Section made by
final rulemaking at 8 A.A.R. 836, effective February 7,
2002 (Supp. 02-1).
Rl6-3-1 08. Hearing Procedure
A. A hearing shaH ordinarily proceed in the foHowing manner:
1. The AppeHant may make an opening statement
Supp.02-1 Page 2 March 31,2002
Ari::ofUl Administrative Code
State Board ofTax Appeals - Luxury, Transaction Privilege (Sales), Use, Estate, Income
Title 16, Ch. 3
2. The Department may make an opening statement or
reserve its opening statement until the clos~ of the Appel­lant's
case.
3. The Appellant shall state its position and present its argu-ments
and evidence. .
4. The Department may make a previously-reserved open­ing
statement, state its position, and present its arguments
and evidence.
5. The Appellant may make a closing statement, presenting
final arguments.
6. The Department may make a closing statement, present­ing
final arguments.
7. The Appellant may reply to the Department's closing
statement or final arguments.
B. The Board may direct a party to submit an additional memo­randum
or information within a reasonable period of time. The
Board shall grant the opposing party a reasonable period of
time to respond to the additional memorandum or information.
C. The Board may recess or continue a hearing for good cause.
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Former Section RI6-3-108 repealed, new Section RI6-3­108
adopted effective January 7,1977 (Supp. 77-1).
Former Section RI6-3-108 renumbered and amended as
Section RI6-3-105, fonner Section RI6-3-124 renum­bered
and amended as Section RI6-3-108 effective
August 27, 1980 (Supp. 80-4). Section repealed; new
Section made by final rulemaking at 8 A.A.R. 836, effec­tive
February 7,2002 (Supp. 02-1).
R16-3-109. Evidence Produced at the Hearing
A. The Board shall accept oral evidence only upon oath or affir­mation.
B. Each party may call and examine witnesses, introduce exhib­its,
and cross-examine witnesses on any matter relevant to the
appeal. The presiding officer at the hearing may call a party, or
any other person who is present, to testify under oath or affir­mation.
The presiding officer and any member of the Board or
its staff may question witnesses.
C. The Board may admit any relevant evidence, including affida­vits
and forms of hearsay evidence. The Board shall be liberal
in admitting evidence but shall consider objections to the
admission and comments on the weakness of evidence in
assigning weight to the evidence.
D. The Board may admit carbon copies, photocopies, or copies
made by similar procedures in place of original documents
upon a showing of authenticity and proper foundation.
E. A party may substitute an exact legible copy for an exhibit
upon written request if the request is submitted to the Board
within 10 days after the hearing.
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Amended effective January 7,1977 (Supp. 77-1). Fonner
Section RI6-3-109 renumbered and amended as Section
RI6-3-106, former Section R16-3-114 renumbered and
amended as Section RI6-3-109 effective August 27,1980
(Supp. 80-4). Section repealed; new Section made by
final rulemaking at 8 A.A.R. 836, effective February 7,
2002 (Supp. 02-1).
R16-3-110. Official Notiee
A. The Board may take official notice of the following without
the production of additional evidence:
1. Records maintained by the Board.
2. Tax returns filed with the Department for or on behalf of
the Appellant or any affiliated company and related
records on file with the Department.
3. Any fact that may be judicially noticed by the courts of
this state.
B. ~he parties may, refute any matters officially noticed at any
hme before the Board's decision or order becomes fmal.
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Former Section R16-3-110 repealed, new Section R16-3­110
adopted effective January 7, 1977 (Supp. 77-1).
Former Section RI6-3-110 renumbered and amended as
Section RI6-3-107, former Section RI6-3-115 renum-bered
and amended as Section RI6-3-110 effective
August 27,1980 (Supp. 80-4). Former Section RI6-3-11O
repealed; new Section RI6-3-110 renumbered from R16­3-
116 and amended by final rulemaking at 8 A.A.R. 836,
effective February 7, 2002 (Supp. 02-1).
R16-3-111. Subpoena
The Board may, at its discretion or upon written request submitted
by a party at least IS days before a hearing, issue SUbpoenas for the
attendance of witnesses or the production of books, records, docu­ments,
or other evidence that is not confidential or privileged. A
subpoena shall be served on behalf of and at the expense of the
party requesting its issuance.
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Amended effective January 7, 1977 (Supp. 77-1). Former
Section RI6-3-111 renumbered and amended as Section
R16-3-114, former Section R16-3-1 03 renumbered and
amended as Section RI6-3-111 effective August 27, 1980
(Supp. 80-4). Section repealed; new Section made by
final rulemaking at 8 A.A.R. 836, effective February 7.
2002 (Supp. 02-1).
R16-3-112. Repealed
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Amended effective January 7, 1977 (Supp. 77-1). Former
Section RI6-3-112 repealed, former Section RI6-3-104
renumbered and amended as Section RI6-3-112 effective
August 27, 1980 (Supp. 80-4). Section repealed by final
rulemaking at 8 A.A.R. 836, effective February 7, 2002
(Supp.02-1).
R16-3-113. Transcripts and Records
A. The hearing before the Board shall be transcribed upon written
request submitted by a party to the Board at least five days
before the hearing. The transcript shall be prepared at the
expense of the requesting party.
B. A person shall not remove the records of the Board from its
office for use as evidence or for other purposes. The Board
shaH provide certified copies of records as required under
A.R.S. Title 39, Chapter 1.
Historical Note
Adopted effective December 30,1974 (Supp. 75-1).
Amended effective January 7, 1977 (Supp. 77-1). Former
Section RI6-3-113 amended and former Section RI6-3­123
renumbered and amended as Section RI6-3-113
effective August 27, 1980 (Supp. 80-4). Section repealed;
new Section made by fmal rulemaking at 8 A.A.R. 836,
effective February 7,2002 (Supp. 02-1).
March 31, 2002 Page 3 Supp.02-1
Title 16, Ch. 3 Ari:ona Administrative Code
State Board ofTax Appeals - Luxury, Transaction Privilege (Sales), Use, Estate, Income
Page 4
Rl6-3-11 4. Decision or Order ,
A. If a quorum of the Board agrees on a decision or order, the
Board shall issue the decision or order.
B. The Board shall issue all decisions or orders in writing and
shall include separately-stated fmdings of fact and conclusions
of law.
C. The Board shall mail, return receipt requested, or hand deliver
a decision or order to the parties.
D. Except in the case of a tax dispute between municipalities, a
decision or order is final 30 days after the Appellant receives it
unless an aggrieved party files a motion for rehearing or
review within 15 days after receipt.
E. In a dispute between municipalities, a decision or order is fmal
on the date of receipt by the party. An aggrieved party has 30
days to appeal the decision or order of dismissal to the tax
court.
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Amended effective January 7, 1977 (Supp. 77-1). Former
Section RI6-3-114 renumbered and amended as Section
RI6-3-109, former Section RI6-3-111 renumbered and
amended as Section RI6-3-114 effective August 27, 1980
(Supp. 80-4). Section repealed; new Section made by
final rulemaking at 8 A.A.R. 836, effective February 7,
2002 (Supp. 02-1).
R16-3-115. Rehearing or Review of Decision or Order
A. The Board may grant a rehearing or review of a decision or
order based on a motion by an aggrieved party, or at its own
discretion, for any of the following reasons:
1. The findings of fact, conclusions of law, order, or deci­sion
are not supported by the evidence or are contrary to
law.
2. The party seeking review was deprived of a fair hearing
due to irregularity in the proceedings, abuse ofdiscretion,
or misconduct of the prevailing party.
3. Accident or surprise which could not have been pre­vented
by ordinary prudence.
4. Material evidence, newly discovered, which with reason­able
diligence could not have been discovered and pro­duced
at the hearing.
5. Error in admission or rejection of evidence, or other
errors of law occurring at the hearing or during the
progress of the action.
6. The decision is the result of passion, bias or prejudice.
B. Enforcement of a decision of the Board is stayed pending a
determination on the motion for rehearing or review. If a
motion for rehearing or review is denied, the stay is automati­cally
lifted. The decision becomes final 30 days after the
Appellant is notified of the Board's action on the motion for
rehearing or review.
C. The aggrieved party shall ensure that the motion for a rehear­ing
or review is in writing and specifies the grounds upon
which the motion is based. The aggrieved party may amend
the motion at any time before the Board rules on it.
D. If the Board desires a response to the motion for rehearing or
review from the opposing party, the Board shall notify the
opposing party in writing and allow a reasonable period of
time for preparation and filing of the response.
E. After granting a motion for rehearing or review, the Board
may take additional testimony, amend findings of fact or con­clusions
of law, or make new findings or conclusions, and
issue a new decision, depending on the particular circum­stances
of the appeal
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Supp.02-1
Amended effective January 7, 1977 (Supp. 77-1). Former
Section RI6-3-115 renumbered and amended as Section
RI6-3-110, former Sections RI6-3-116 and RI6-3-117
renumbered and amended as Section R16-3-115 effective
August 27, 1980 (Supp. 80-4). Former Section RI6-3-115
repealed; new Section Rl6-3-115 renumbered from R16­3-
121 and amended by fmal rulemaking at 8 A.A.R. 836,
effective February 7, 2002 (Supp. 02-1).
R16-3-116., Renumbered
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Amended effective January 7,1977 (Supp. 77-1). Former
Section RI6-3-116 renumbered and amended as Section
RI6-3-115, former Section RI6-3-118 renumbered and
amended as Section RI6-3-116 effective August 27,1980
(Supp. 80-4). Section RI6-3-116 renumbered to RI6-3­110
by final rulemaking at 8 A.A.R. 836, effective Febru­ary
7, 2002 (Supp. 02-1).
R16-3-117. Repealed
Rl6-3-119. Repealed
Historical Note
Adopted effective December 30, 1974 Supp. 75-1).
Amended effective January 7,1977 (Supp. 77-1). Former
Section R 16-3-119 renumbered and amended as Section
R16-3-117, former Sections RI6-3-121 and RI6-3-122
renumbered and amended as Section Rl6-3-119 effective
August 27, 1980 (Supp. 80-4). Section repealed by final
rulemaking at 8 A.A.R. 836, effective February 7, 2002
(Supp. 02-1).
R16-3-120. Repealed
Historical Note
Adopted effective December 30, 1974 (Supp. 75-1).
Amended effective January 7,1977 (Supp. 77-1). Former
Section RI6-3-120 renumbered and amended as Section
R16-3-1I8, former Section RI6-3-125 renumbered and
amended as Section RI6-3-120 effective August 27,1980
(Supp. 80-4). Section repealed by final rulemaking at 8
A.A.R. 836, effective February 7, 2002 (Supp. 02-1).
R16-3-121. Renumbered
Historical Note
Adopted effective December 30,1974 (Supp. 75-1).
March 31, 2002
Ari::ona Administrative Code
State Board ofTax Appeals - Luxury, Transaction Privilege (Sales), Use, Estate, Income
Title 16, Ch. 3
Amended effective January 7, 1977 (Supp. 77-1). Former
Section RI6-3-121 renumbered and amended as Section
R16-3-119, former Section Rl6-3-126 renumbered and
amended as Section Rl6-3-121 effective August 27,1980
(Supp. 80-4). Section renumbered to RI6-3-115 by final
rulemaking at 8 A.A.R 836, effective February 7, 2002
(Supp.02-1).
Rl6-3-122. Renumbered
Historical Note
Adopted effective December 24,1974 (Supp. 75-1).
Amended effective January 7, 1977 (Supp. 77-1).
Renumbered and amended as Section R16-3-119 effec- .
tive August 27, 1980 (Supp. 80-4).
R16-3-123. Renumbered
Historical Note
Adopted effective December 24, 1974 (Supp. 75-1).
Amended effectiveJanuary 7,1977 (Supp. 77-1).
Renumbered and amended as Section RI6-3-113 effec­tive
August 27, 1980 (Supp. 80-4).
RI6-3-124. Renumbered
Historical Note
. Adopted ~ffective December 24, 1974 (Supp. 75-1).
Amended effective January 7,1977 (Supp. 77-1).
Renumbered and amended as Section R16-3-108 effec­tive
August 27,1980 (Supp. 80-4).
RI6-3-125. Renumbered
Historical Note
Adopted effective December 24, 1974 (Supp. 75-1).
Amended effective January 7, 1977 (Supp. 77-1).
Renumbered and amended as Section R16-3-120 effec­tive
August 27, 1980 (Supp. 80-4).
RI6-3-126. Renumbered
Historical Note
Adopted effective January 7, 1977 (Supp. 77-1). Renum­bered
and amended as Section Rl6-3-121 effective
August 27, 1980 (Supp. 80-4).
Mareh 31, 2002 Page 5 Supp.02-1
Budget Tables
BUDGET AND PERFORMANCE MEASURES
BUDGET
FY2003 FY2003 FY2004 FY2004 FY2005
Actual Actual
Budget Expenditure Budget Expenditure Budget
FTE 4.0 4.0 4.0 4.0 4.0
Personal Services 187.7 166.4 192.7 165.7 195.6
ERE 37.5 32.8 35.2 26.8 35.3
Prof. & Outside
Services .9 .5 .9 .5 .9
Travel-in-State .9 .5 .9 - 1.3 .9
Other Op. Exp.
Equipment
Total
41.5
0.0
268.5
40.1
0.0
240.3
43.4
0.0
273.10
43.9
0.0
238.2
46.0
0.0
278.7
PERFORMANCE MEASURES
FY2003 FY2004 FY2005
Actual Actual Estimate
Caseload Processing
(and number of issues) 138(315) 121(215) 150(300)
Number of Tax Appeals
resolved 39 103 80
Number backlogged appeals
requiring written decision 3 0 10
Percentage of rulings upheld 90 90 90
in courts
Number of months to
process appeal 5.5 4.5 4.5
Strategic Plan
· TXA 0.0
Mission:
AGENCY SUMMARY
STATE BOARD OF TAX APPEALS
Director: Ruben M. Medina, Executive Director
Phone: (602)~1102
AR.S. § 42-1252
To provide an independent appeals process for taxpayers with adverse decisions from the Department of Revenue and Office ofAdministrative Hearings,
and to resolve jurisdictional disputes between municipalities regarding the imposition of transaction privilege and use taxes.
Description:
The State Board of Tax Appeals hears and decides appeals filed by taxpayers and Arizona municipalities concerning income, transaction privilege, use,
luxury, and estate taxes.
Strategic Issues
Issue 1 Continue to expedite tax appeals in a timely manner to prevent any delays in the appeals process.
The Board is current in handling tax appeals. Maintaining the appeals process at the current level continues to be the Board's priority. The issuance of
timely decisions and the timely publication of such decisions benefrts all parties involved as well as tax practitioners. Unforeseen legislative changes and
court decisions may increase the Board's case/oad which will again create de/ays and backlogs in the appeals process. For example, in FY 2004 - 2005 the
legislation relating to the appropriaion of $6,537.000 and 153 FTE to the Revenue Department for the revenue generating program will result in more audits,
pretests and tax appeals to the BCBd. Furthennore, the Board's case/oad is based on appeals filed from decisions of the Department of Revenue and the
Office of Administrative Hearings, large increases in the number of decisions issued by these State agencies may also create delays and backlogs in the
appeals process.
Goal 1 To receive and process tax appeals expeditiously to prevent any delays in the appeals process.
Objective 1 2004 Obj: To maintain the current timely processing of appeals and issuance of writteri·decisions within 30 days of Board action.
2005 Obj: To maintain the current timely processing of appeals and issuance of written decisions within 30 days of Board action.
2006 Obj: To maintain the current timely processing of appeals and issuance of written decisions within 30 days of Board action.
2007 Obj: To maintain the current timely processing of appeals and issuance of written decisions within 30 days of Board action.
r 'nnance Measures: FY2oo3 FY2004 FY2004 FY2005 FY2006 FY2oo7
ML Budget Type Actual Estimate Actual Estimate Estimate Estimate
1 ~ ~ IP Case/oad processing (and number of issues). 138(315) 200(400) 121(215) 150(300) 175(350) 200(400)
2 ~ ~ OP Number of tax appeals resolved. 39 80 103 80 100 110
3 ~ ~ EF Number backlogged requiring written decision. 3 10 0 10 15 20
4 ~ ~ EF Number of months to process appeal. 6.5 6.5 4.5 4.5 5.5 5.5
Tuesday,August31,2004 9:44AM
BOTA Meeting Minutes
MINUTES OF A REGULAR MEETING
OF THE ARIZONA STATE BOARD OF TAX APPEALS
HELD August 27, 2002
The State Board of Tax Appeals, after notice. duly posted, held a regular meeting and
hearings at 8:45 a.m., on August 27, 2002, 100 N. 15th Avenue, Suite 140, Phoenix, Arizona.
Present were:
Board
Janice C. Washington, Chairperson
William L. Raby, Member
Stephen P. Linzer, Member
Staff
Ruben M. Medina, Chief Clerk
Alisha L. Woodring, Hearing Officer
The meeting was called to order by Ms. Washington, Chairperson. Ms. Washington called
for any corrections, deletions, additions to the minutes of June 11, 2002. It was moved by Mr.
Raby and seconded that the minutes stand approved as written. /The vote was 3-0-0 in favor. It
was so ordered.
The Board then considered the following:
APPROVAL OF DECISION:
1. Kay Remein - 1861-01-1 - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Mr. Raby and seconded that the
decision be approved as written. The vote was 3-0-0. It was so ordered.
FOR DECISION:
2. Pacific Industrial Co., Inc. - 1866-01-S
Oral hearing held on this date. To be considered for decision.
The appeal involved a transaction privilege tax assessment issued for the audit period March
1, 1994 through April 30, 1998, plus penalties and interest.
Discussion was held by the Board and the matter was deferred for final decision.
3. Claudio D. Corral- 1871-02-S
Oral hearing held on this date. To be considered for decision.
The appeal involved the Appellant's claim for refunds based on amended transaction
privilege tax returns for July, August, October, November and December 1992.
Discussion was held by the Board and the matter was deferred for final decision
,. . Pagel
OTHER BUSINESS:
Arizona Tax Conference - October 30, 31 and November 1,2002
Hyatt Regency, Phoenix
Budget for FY 2004 & FY 2005
There being no further business to come before the Board, the meeting was adjourned.
Dated this 27th day of August, 2002.
Ruben M Medina, Chief Clerk
Prepared by:
Catherine Croswell
Tax Board Secretary
MINUTES OF A REGULAR MEETING
OF THE ARIZONA STATE BOARD OF TAX APPEALS
HELD September 2, 2003
The State Board of Tax Appeals, after notice .duly posted, held a regular meeting and
hearing commencing at 8:45 a.m., on September 2, 2003, 100 N. 15th Avenue, Suite 140,
Phoenix, Arizona.
Present were:
Board
William L. Raby, Chairman
Jacalyn A. Askin, Member
Janice C. Washington, Member
Staff
Ruben M. Medina, Chief Clerk
Alisha L. Woodring, Hearing Officer
The meeting was called to order by Mr. Raby, Chairman. Mr. Raby called for any
corrections, deletions, additions to the minutes of July 15, 2003. It was moved by Ms.
Washington and seconded that the minutes stand approved as written. The vote was 3-0-0 in
favor. It was so ordered.
(The regular meeting was recessed until the conclusion of the heai-ing scheduled for 9:00 a.m.)
The Board reconvened the meeting at 9:45 a.m., and then considered the following:
APPROVAL OF DECISIONS:
1. Paula Lamfers - 1899-03-I - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as corrected. The vote was 3-0-0. It was so ordered.
2. Richard and Charlotte Broderick-1894-03-1 - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as corrected. The vote was 3-0-0. It was so ordered.
3. Warren Bechhoefer-1895-03-1 - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as corrected. The vote was 3-0-0. It was so ordered.
4. Michael R. Schaefer dba Arcadia Lodge - 1891-03-S - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as corrected. The vote was 3-0-0. It was so ordered.
Page 2
MOTION FOR DISMISSAL:
5. Sharon Eason - 1898-03-1
The Board considered Appellee's Motion to Dismiss based on Appellant's failure to file
supplemental information requested by the Board.
The Board, having considered the motion, it was moved by Ms. Washington and seconded
that the motion be granted. The vote was 3-0..0. It was so ordered.
MOTION TO CONTINUE SUSPENSION OF PROCEEDINGS:
6. Excell Agent Services, L.L.c., Comdisco, Inc., Golden Enterprises, Inc., Voltdelta Resources
Inc. - 1900-03-S/U(4)
The Board considered the Appellants' request for suspension of proceedings until November
25, 2003. The reason for the request was to allow additional time to determine the factual
issue involving the amount of the requested refunds.
The Board having discussed the request, it was moved by Ms. Washington and seconded
that the Appellants be given notice that their opening memorandum addressing the legal
issues would be due within 20 days. The vote was 3-0-0. It was so ordered.
FOR DECISIONS:
7. Richard Birch -1903-03-I
Oral hearing had been waived by the parties. To be considered for decision.
The appeal involved income tax assessments issued for the tax years 1998 and 1999, plus
penalties and interest.
Discussion was held by the Board and the matter was deferred for final decision.
8. Marillyn L. Baehr - 1902-03-1
Oral hearing had been waived by the parties. To be considered for decision.
The appeal involved denial of a claim for refund for the tax year 1997.
Discussion was held by the Board and the matter was deferred for final decision.
9. Douglas and Jamie Roessing - 1889-03-AFTC
Oral hearing was held on May 6, 2003. To be considered for decision.
The appeal involved the Department's denial of Appellants' claim for an alternative fuel tax
credit for the tax year 2000. The Board had taken the matter under advisement pending the
Department's review of additional information provided by the Appellants.
Discussion was held by the Board and the matter was deferred for final decision.
Page 3
10. Shukriyyah E. Canada- 1904-03-1
Oral hearing was held at 9:00a.m. on this date. To be considered for decision.
The appeal involved an income tax assessment issued for the tax years 1998, 1999,2000, and
2001, plus interest.
Discussion was held by the Board and the matter was deferred for final decision.
REQUEST FOR CONSOLIDATION OF APPEALS:
11. Appeals of Manuel and Mary Lou Torres, Docket No. 1907-03-TP, Victor E. and Mary E.
Lowman, Docket No. 1906-03-TP, and Robert L. and Mary F. Yniguez, Docket No. 1908­03-
TP.
These appeals involved Arizona government employees who paid Arizona income taxes on
Arizona government pensions for the years 1997 through 2002. The taxpayers are claiming
refunds on the taxes paid due to the enactment of Chap. 312, Laws of 1989, that repealed the
tax exemption, except for the allowance of a subtraction of up to $2,500 of retirement
benefits paid. The rationale for the refund would be that all persons employed by the state
prior to 1989 were employed pursuant to an implied contract that their retirement benefits
would be free of Arizona income tax.
The Board discussed whether a conflict of interest existed for Mr. Raby and Mrs. Askin in
this matter. Under the statutes relating to the Board and under the Board's rule, a quorum is
required for the Board to take any action. Both Mr. Raby and Mrs. Askin were employed in
positions covered by the Arizona State Retirement System prior to 1989. The Board
reviewed and discussed the provisions of AR.S. § 38-503 and 38-505 that addresses conflict
of interest. A.R.S. § 38-505B. specifically provides for the authority of a public officer to act
if they make known their substantial interests in the official records of the agency.
Based on the provisions in A.R.S. 38-505B, Mr. Raby has orally made it known in the record
that he has a substantial interest. Mrs. Askin made known her substantial interest in writing
and such written notification is made part ofthe minutes of this meeting.
Based on the above actions, the Board approved the Appellants' request for consolidation of
the appeals.
The Board further directed the Chief Clerk to request an attorney general's opinion on the
question whether they have the authority to act under AR.S § 38-505B.
OTHER BUSINESS:
1) Submission of Budget for FY 2005 - The Chief Clerk reported on the budget
submission and informed the Board that the Budget was reduced by $30,000 over the
previous year appropriation. The only area that funds would be available if further
reductions are made would be in vacancy savings.
2) Submission of 5-Year Strategic Plan - The strategic plan submission was briefly
reviewed by the Chief Clerk.
Page 4
There being no further business to come before the Board, the meeting was adjourned.
Dated this 2nd day of September, 2003.
Ruben M. Medina, Chief Clerk
Prepared by:
Catherine Croswell
Tax Board Secretary
5781 N Calle Grandeza
Tucson, AZ 85718
August 20, 2003
Mr. Ruben M. Medina, ChiefClerk
Arizona Board ofTax Appeals
100 N 15th Avenue, Suite 140
Phoenix, AZ 85007
Dear Ruben:
I have reviewed the appeal documents submitted ofManual and Mary Lou Torres, Victor E. and
Mary E. Lowman and Robert L. and Mary~. Yniquez. My understanding oftheir claim is that
the change in the Arizona Revised Statutes in 1989 that replaced the total exemption ofretired
state employees' retirement in the course oftheir ofemployment. Further, they are making this
claim on behalfofthe "class" of all employees so affected, e.g., anyone employed under the
Arizona State Retirement System prior to the change in statute.
I have worked for public agencies that are Arizona State RetiremeI'!.t System employers since
1988. Thus, I have a conflict of interest in assessing the merits ofthis issue and the related
arguments. I, therefore, must abstain from deliberations related to these appeals.
Thank you for giving me ample time to review this matter. I will see you on the second of
September to deliberate other appeals on that agenda.
Sincerely~
~~
~alyn A. Askin
MINUTES OF A REGULAR MEETING
OF THE ARIZONA STATE BOARD OF TAX APPEALS
HELD October 8, 2002
The State Board of Tax Appeals, after notice duly posted, held a regular meeting at 9:00
a.m., on October 8,2002, 100 N. 15th Avenue,Suite 140, Phoenix, Arizona.
Present were:
Board
Janice C. Washington, Chairperson
William L. Raby, Member
Stephen P. Linzer, Member
Staff
Ruben M. Medina, Chief Clerk
Alisha L. Woodring, Hearing Officer
The meeting was called to order by Ms. Washington, Chairperson. Ms. Washington called
for any corrections, deletions, additions to the minutes of August 27, 2002. It was moved by Mr.
Raby and seconded that the minutes stand approved as written.~The vote was 3-0-0 in favor. It
was so ordered.
The Board then considered the following:
APPROVAL OF DECISIONS:
1. Claudio D. Corral- 1871-02-S - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Mr. Raby and seconded that the
decision be approved as written. The vote was 3-0-0. It was so ordered.
2. Pacific Industrial Co., Inc. - 1866-02-S - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Mr. Raby and seconded that the
decision be approved as written. The vote was 3-0-0. It was so ordered
FOR DECISION:
3. 1. Ernest Fresques - 1875-02-1
Oral hearing waived by parties. To be considered for decision.
The appeal involved an income tax assessment issued for the tax years 1994 and 1995, plus
penalties and interest.
Discussion was held by the Board and the matter was deferred for final decision.
Page 2
4. Southwestern Dakotah - 1872-02-S
Oral hearing waived by the parties. To be considered for decision.
The appeal involved a transaction privilege tax assessment issued for the audit period
January 1997 through September 2000, phis penalties and interest.
Discussion was held by the Board and the matter was deferred for final decision.
FOR DISCUSSION:
Federal Retiree Appeals. Discussion was held on these matters to determine how to proceed
with these appeals. The Board directed the Chief Clerk to schedule a two-hour hearing
regarding the appeal of Evelyn Koeck, Docket No. 1441-95-1.
INFORMATIONAL PURPOSES:
Sun State Electric, Inc. and Troy and Peggy Porter dba Sun State Electric - 1856-01-S &
1857-01-S
These appeals were dismissed due to the Appellants having withdrawn their appeal.
OTHER BUSINESS:
10% Budget Reduction for FY 2003 Budget and
FY 2004 & FY 2005 Budget Request - The Board was made aware of the impact of the
budget reductions and that further reductions for the FY 2004 & FY 2005 Budget Request
may be made due to the revenue shortages being experience.
Arizona Tax Conference - October 30, 31 and November 1, 2002
Hyatt Regency, Phoenix
There being no further business to come before the Board, the meeting was adjourned.
Dated this 8th day of October, 2002.
Ruben M. Medina, Chief Clerk
Prepared by:
Catherine Croswell
Tax Board Secretary
MINUTES OF A REGULAR MEETING
OF THE ARIZONA STATE BOARD OF TAX APPEALS
HELD October 29, 2002
The State Board of Tax Appeals, after notice duly posted, held a regular meeting at 8:45
a.m., on October 29,2002, 100 N. 15th Avenue, Suite 140, Phoenix, Arizona.
Present were:
Board
Janice C. Washington, Chairperson
William L. Raby, Member
Staff
Ruben M. Medina, Chief Clerk
Absent
Stephen P. Linzer, Member
Alisha L. Woodring, Hearing Officer
The meeting was called to order by Ms. Washington, Chairperson. Ms. Washington called
for any corrections, deletions, additions to the minutes of October 8, 2002. It was moved by Mr.
Raby and seconded that the minutes stand approved as written..The vote was 2-0-1 in favor. It
was so ordered.
The Board then considered the following:
APPROVAL OF DECISIONS:
1. 1. Ernest Fresques - 1875-02-1 - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Mr. Raby and seconded that the
decision be approved as written. The vote was 2-0-1. It was so ordered.
2. Southwestern Dakotah - 1872-02-S - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Mr. Raby and seconded that the
decision be approved as written. The vote was 2-0-1. It was so ordered
FOR DECISION:
3. Ronald L. and Audrey Stearns - 1870-02-1
Hearing was held at 9:00 a.m. on this date. To be considered for decision.
The appeal involved the Department's disallowance of a portion of a credit taken for income
tax paid to other states in tax year 1998.
Discussion was held by the Board and the matter was deferred for final decision.
Page 2
4. Best Laid Floors, L.L.c. - 1869-02-S
Hearing was held at 10:00 a.m. on this date. To be considered for decision.
The appeal involved a transaction privilege tax assessment issued for the audit period May
1997 through December 2000, plus penalty and interest.
Discussion was held by the Board and the matter was deferred for final decision.
There being no further business to come before the Board, the meeting was adjourned.
Dated this 29th day of October, 2002.
Ruben M. Medina, Chief Clerk
Prepared by:
Catherine Croswell
Tax Board Secretary
MINUTES OF A REGULAR MEETING
OF THE ARIZONA STATE BOARD OF TAX APPEALS
HELD December 3, 2002
The State Board of Tax Appeals, after notice _duly posted, held a regular meeting and
hearing at 8:45 a.m., on December 3,2002, 100 N. 15th Avenue, Suite 140, Phoenix, Arizona.
Present were:
Board
Janice C. Washington, Chairperson
William L. Raby, Member
Stephen P. Linzer, Member
Staff
Ruben M. Medina, Chief Clerk
Alisha L. Woodring, Hearing Officer
The meeting was called to order by Ms. Washington, Chairperson. Ms. Washington called
for any corrections, deletions, additions to the minutes of October 29, 2002. It was moved by
Mr. Raby and seconded that the minutes stand approved as writt~n. The vote was 3-0-0 in favor.
It was so ordered.
(The regular meeting was recessed until the conclusion of the hearing scheduled for 9:00 a.m.)
The Board reconvened the meeting at 11: 15 a.m. and then considered the following:
APPROVAL OF DECISION:
1. Michael E. and Debra Brownfield -1858-01-S - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Mr. Raby and seconded that the
decision be approved as corrected. The vote was 3-0-0. It was so ordered.
FOR DECISIONS:
2. Orville R. and Irene Biel- 1876-02-1
Oral hearing was held on November 26, 2002. Hearing conducted by Alisha L. Woodring,
Hearing Officer. To be considered for decision.
The appeal involved proposed income tax assessments issued for the tax years 1996 and
1997, plus penalties and interest.
Discussion was held by the Board and the matter was deferred for final decision.
Page 2
3. David Lerner - 1879-02-1
Hearing was held on November 26, 2002. Hearing conducted by Alisha L. Woodring,
Hearing Officer. To be considered for decision,
The appeal involved proposed income tax assessments issued for the tax years 1996, 1997
and 1998, plus penalties and interest.
Discussion was held by the Board and the matter was deferred for final decision.
4. Evelyn Koeck - 1441-95-1
Hearing was held at 9:00 a.m. on this date. To be considered for decision.
The appeal involved the Department's denial ofrefund claims of Arizona income taxes
imposed upon federal pensions for the years 1985 to 1988.
Discussion was held by the Board and the matter was deferred for final decision.
OTHER BUSINESS:
SB 1095 Change in Return to Work Program for retirees under A.R.S. 38-766.01.
The Board was informed by the Chief Clerk that under this change in the retirement statutes,
that he meets all the requirements and could now work full-time. The change in the statute
requires that the retired member acknowledges that he is not entitled to accrue credited service
and other benefits.
There being no further business to come before the Board, the meeting was adjourned.
Dated this 3rd day of December, 2002.
Ruben M. Medina, Chief Clerk
Prepared by:
Catherine Croswell
Tax Board Secretary
MINUTES OF A REGULAR MEETING
OF THE ARIZONA STATE BOARD OF TAX APPEALS
HELD January 21, 2003
The State Board of Tax Appeals, after notice. duly posted, held a regular meeting and
hearing at 8:45 a.m., on January 21,2003, lOON. 15th Avenue, Suite 140, Phoenix, Arizona.
Present were:
Board
William L. Raby, Chairman
Thomas W. Bade, Member
Janice C. Washington, Member
Staff
Ruben M. Medina, Chief Clerk
Alisha L. Woodring, Hearing Officer
The meeting was called to order by Mr. Raby, Chairman. Mr. Raby called for any
correotions, deletions, additions to the minutes of December 3, 2002. It was moved by Ms.
Washington and seconded that the minutes stand approved as written. The vote was 2-0-1 in
favor. It was so ordered.
(The regular meeting was recessed until the conclusion of the hearing scheduled for 9:00 a.m.)
The Board reconvened the meeting at 9:40 a.m. and then considered the following:
APPROVAL OF DECISIONS:
1. David Lerner - 1879-02-1 - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as written. The vote was 2-0-1. It was so ordered.
2. Orville R. and Irene Biel- 1876-02-1 - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as written. The vote was 2-0-1. It was so ordered.
FOR DECISIONS:
3. Best Laid Floors, L.L.C. - 1869-02-S
Oral hearing was held on October 29,2002. To be considered for decision.
The appeal involved transaction privilege tax assessments issued for the State of Arizona
and the City of Sedona for the }udit period May 1997 through December 2000, plus
penalties and interest.
Discussion was held by the Board and the matter was deferred for final decision.
Page 2
4. Robert Decker & Assoc. P.C. -1878-02-AFTC
Oral hearing was held on December 17, 2002. Hearing conducted by Alisha L. Woodring,
Hearing Officer. To be considered for decision
The appeal involved the Department's denial of Appellants' request for relief from the fuel
usage requirements.
Discussion was held by the Board and the matter was deferred for final decision.
5. Steve Hernandez - 1880-02-1
Oral hearing was held on January 14, 2003. Hearing conducted by Alisha L. Woodring,
Hearing Officer. To be considered for decision.
The appeal involved income tax assessments issued for the tax years 1996 and 1997, plus
penalties and interest.
Discussion was held by the Board and the matter was deferred for final decision.
6. Linda R. Neal- 1874-02-1
Oral hearing was ·held on January 14, 2003. Hearing conducted by Alisha L. Woodring,
Hearing Officer. To be considered for decision.
The appeal involved proposed income tax assessments issued for the tax years 1996, 1997,
and 1998, plus penalties and interest.
Discussion was held by the Board and the matter was deferred for final decision.
7. Brice and Arlesa Hammond - 1887-02-AFTC
Oral hearing held on this date. To be considered for decision.
The appeal involved the Department's denial of Appellants' claim for an alternative fuel tax
credit for the tax year 2000.
Discussion was held by the Board and the matter was deferred for final decision.
CONSIDER MOTION FOR REHEARING:
8. Michael and Debra Brownfield - 1858-01-S
On December 3, 2002, the Board issued its decision denying the Appellants' appeal. The
decision was received on December 4, 2002 and the Appellant filed a timely Motion for
Rehearing and Review on December 19, 2002. The Board considered the motion.
The Board having discussed this matter, it was moved by Janice Washington and seconded
that the motion be denied and that a corrected decision be issued. The vote was 2-0-1. It was
so ordered.
Page 3
CONSIDERATION OF EXCEEDING PAGE LIMITATION:
9. Phoenix Newspapers, Inc. & Affiliates -1884-
The Department had filed an objection to Appellant's request to exceed the page limit of the
opening memorandum. The Appellant's memorandum was twenty-three pages in length and
included ten exhibits. The Board considered the Appellant's request.
The Board having discussed the request, it was moved by Janice Washington and seconded
to grant the request. The Department would be allowed additional time to file its
memorandum. The vote was 3-0-0. It was so ordered.
OTHER BUSINESS:
Pending Legislation - The Board discussed a proposed draft of a memorandum to be
submitted to the legislative committee, if necessary, that will consider legislation
merging the Board with another state agency.
Budget for FY 2003 - 2004 and FY 2004 - 2005- The Board was provided with the
budget recommendations of Office of Strategic Planning and Budgeting. The budget
recommendations by the office of the JLBC had not been released.
There being no further business to come before the Board, the meeting was adj oumed.
Dated this 21st day of January, 2003.
Ruben M. Medina, Chief Clerk
Prepared by:
Catherine Croswell
Tax Board Secretary
MINUTES OF A REGULAR MEETING
OF THE ARIZONA STATE BOARD OF TAX APPEALS
HELD February 11,2003
The State Board of Tax Appeals, after notice duly posted, held a regular meeting and
hearing at 9:00 a.m., on February 11,2003, 100 N. 15th Avenue, Suite 140, Phoenix, Arizona.
Present were:
Board
William L. Raby, Chairman
Thomas W. Bade, Member
Janice C. Washington, Member
Staff
Ruben M. Medina, Chief Clerk
Alisha L. Woodring, Hearing Officer
The meeting was called to order by Mr. Raby, Chairman. Mr. Raby called for any
corrections, deletions, additions to the minutes of January 21, 2003. It was moved by Ms.
Washington and seconded that the minutes stand approved as written. The vote was 3-0-0 in
favor. It was so ordered.
The Board then considered the following:
APPROVAL OF DECISIONS:
1. Robert Decker & Assoc. P.C. - 1878-02-AFTC
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be revised. The vote was 3-0-0. It was so ordered.
2. Steve Hernandez - 1880-02-1- Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as corrected. The vote was 3-0-0. It was so ordered.
3. Linda R. Neal- 1874-02-1 - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as written. The vote was 3-0-0. It was so ordered.
FOR DECISIONS:
4. Warren and Carol Keppler-1881-02-1 & 1882-02-1
Consolidated oral hearing was held on January 21, 2003. Hearing conducted my Alisha L.
Woodring, Hearing Officer. To be-considered for decision.
Page 2
The appeal involved income tax assessments issued for the tax years 1995, 1996, 1997, and
1998, plus interest and penalties for failure to file when due and negligence.
Discussion was held by the Board and the matter was deferred for final decision.
5. Henry and Patricia Leyva - 1873-02-1
Oral hearing to be held at 10:00 a.m. on this date. To be considered for decision after
hearing is held.
. The appeal involved an income tax assessment issued for the tax year 1989, plus interest.
. CONSIDERATION OF MOTION TO DISMISS:
6. Alan Stang ~ 1888-02-1
The Appellee on January 16, 2003 filed a Motion to Dismiss for Failure to Prosecute. On
January 31, 2003, Appellant filed a Response to Motion to Dismiss. The Board discussed
the motion and the Board's rule RI6-3-104 relating to the filing of memoranda. After the
discussion, it was moved by Mr. Bade and seconded that the motion be denied. The vote was
3-0-0. It was so ordered.
FOR DISCUSSION:
7. Representation before the Board - Under Rule 31 and A.R.S.§ 42-1253.
The provisions of the rule and the statute were discussed.
8. David Lerner - 1879-02-1
The Board issued its decision on January 21, 2003. The Board based on its discussion under
item 7. above will issue a corrected decision.
The Appellant on February 6, 2003 filed a timely request for rehearing. The Board
considered the request.
The Board, having reviewed the request for rehearing, it was moved by Ms. Washington and
seconded that the request be denied. The vote was 3-0-0. It was so ordered.
9. Orville and Irene Biel- 1876-02-1
The Board on January 21, 2003 issued its decision denying the appeal. The Appellants filed
correspondence regarding the decision.
The Board, having discussed the matter, directed the Chief Clerk to advise the Appellants
that their recourse is to pursue this matter in the Arizona Tax Court.
(The regular meeting was recessed until the conclusion of the hearing scheduled for 10:00 a.m.)
The Board reconvened the meeting at 11 :00 a.m. and then considered the following:
Item 5. Henry and Patricia Leyva - 1873-02-1
Page 3
Oral hearing having been held, the matter was deferred for final decision, pending the filing
of post-hearing information by the parties within 20 days.
OTHER BUSINESS:
Budget for FY 2003 - 2004 and FY 2004 - 2005 The Joint Appropriations
Committee on January 31, 2003 adopted the JLBC's Budget Recommendation.
The Board was informed that this was good news, at least for now, as many agencies
budgets have not been approved or are being considered for elimination.
There being no further business to come before the Board, the meeting was adjourned.
Dated this 18th day of February, 2003.
~-- VV'~ . •
Ruben M. Medina, Chief Clerk
Prepared by:
Catherine Croswell
Tax Board Secretary
MINUTES OF A REGULAR MEETING
OF THE ARIZONA STATE BOARD OF TAX APPEALS
HELD February 25, 2003
The State Board of Tax Appeals, after notice duly posted, held a regular meeting at 9:30
a.m., on February 25, 2003, 100 N. 15thAvenue, Suite 140, Phoenix, Arizona.
Present were:
Board
William L. Raby, Chairman
Thomas W. Bade, Member
Janice C. Washington, Member
Staff
Ruben M. Medina, Chief Clerk
Alisha L. Woodring, Hearing Officer
Others
Brian Luscher, Attorney
Brian Campbell, Attorney
The meeting was called to order by Mr. Raby, Chairman. Mr. Raby called for any
corrections, deletions, additions to the minutes of February 11,2003. It was moved by Mr. Bade
and seconded that the minutes stand approved as written. The vote was 3-0-0 in favor. It was so
ordered.
The Board then considered the following:
APPROVAL OF DECISIONS:
1. Warren and Carol Keppler-1881-02-1 & 1882-02-1
(Decision drafts prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decisions, it was moved by Mr. Bade and seconded that the
decisions be approved as written. The vote was 3-0-0. It was so ordered.
2. Robert Decker & Assoc. P.C. -1878-02-AFTC
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as revised. The vote was 3-0-0. It was so ordered.
FOR DECISIONS:
3. Ronald and Audrey Stearns - 1870-02-1
Oral hearing was held on October 29, 2003. The Appellant had filed post-hearing
information as requested. To be considered for decision.
The appeal involved the Department's disallowance of a portion of a credit taken for income
tax paid to other states in tax year 1998.
Discussion was held by the Board and the matter was deferred for final decision.
Page 2
4. Evelyn Koeck - 1441-95-1
The Board discussed the supplemental post-hearing memoranda filed by the parties.
No action taken pending further review.
FOR DISCUSSION:
5. Supreme Court Order Amending Rule 31
The provisions of the rule and the statute were discussed.
6. Michael R. Schaefer dba Arcadia Lodge - 1891-03-1
A Notice of Appeal and Supplement to Notice of Appeal was filed in this matter and signed
by J. Michael Schaefer, as Assignee/Appellant. Discussion was held as to what procedure to
be followed in order for the taxpayer to be properly represented.
The Board, having discussed the matter, directed the Clerk to advise the Appellant that he
can be represented under a properly executed power of attorney.
OTHER BUSINESS:
Pending Legislation
SB 1314 Provides for appealing private taxpayer rulings among other provisions.
The Board was informed that this legislation was approved by a vote of
7-0-2 in the Senate Finance Committee.
HB 2494 Class actions prohibited in tax cases
There being no further business to come before the Board, the meeting was adjourned.
Dated this 25th day of February, 2003.
Ruben M. Medina, Chief Clerk
Prepared by:
Catherine Croswell
Tax Board Secretary
MINUTES OF A REGULAR MEETING
OF THE ARIZONA STATE BOARD OF TAX APPEALS
HELD March 11, 2003
The State Board of Tax Appeals, after notice duly posted, held a regular meeting and
hearing at 8:45 a.m., on March 11,2003, 100 N. 15th Avenue, Suite 140, Phoenix, Arizona.
Present were:
Board
William L. Raby, Chairman
Thomas W. Bade, Member
Janice C. Washington, Member
Staff
Ruben M. Medina, Chief Clerk
Alisha L. Woodring, Hearing Officer
The meeting was called to order by Mr. Raby, Chairman. Mr. Raby called for any
corrections, deletions, additions to the minutes of February 25, 2003. It was moved by Ms.
Washington and seconded that the minutes stand approved as written. The vote was 3-0-0 in
favor. It was so ordered.
-
(The regular meeting was recessed until the conclusion of the hearing scheduled for 9:00 a.m.)
The Board reconvened the meeting at 10: 15 a.m. and then considered the following:
APPROVAL OF DECISIONS:
1. Best Laid Floors LLC - 1869-02-S
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as corrected. The vote was 3-0-0. It was so ordered.
2. Ronald and Audrey L. Steams - 1870-02-1
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as corrected. The vote was 3-0-0. It was so ordered.
FOR DISMISSAL:
3. Earl G. and Lesley Higbee -1892-03-1
Board to discuss Appellee's Motion to Dismiss Appeal as Premature.
The Board, having discussed the motion, it was moved by Ms. Washington and seconded
that the motion be granted. The vote was 3-0-0. It was so ordered.
FOR DECISIONS:
4. Ormond Builders, Inc. - 1883-02-1
Oral hearing was held on this date. To be considered for decision.
Page 2
The appeal involved transaction privilege tax assessments for the State of Arizona and the
City of Show low for the audit periods of October 1995 through February 2000.
Discussion was held by the Board and the matter was deferred for final decision pending the
filing of post-hearing information by the Appellant.
5. Evelyn Koeck-1441-95-I
The Board discussed matters relating to the federal retiree cases pending before the Board.
No action taken pending further review.
FOR DISCUSSION:
6. Michael R. Schaefer dba Arcadia Lodge -1891-03-S
In this appeal, 1. Michael Schaefer, who filed the appeal as Assignee/Appellant, was
previously advised that he could represent the taxpayer under aproperly executed power of
attorney. Mr. Schaeffer filed an objection to this requirement.
Discussion was held and the Chief Clerk was directed to inform J. Michael Schaefer that he
could represent the taxpayer only under a Board prescribed, properly executed power of
attorney. Failure to file the power of attorney form within the time granted will be cause for
dismissal of the appeal.
7. Standing Pre-hearing order proposed by William L. Raby, Chairman.
Discussion on this matter was postponed until another regular meeting.
8. Case relating to Gordon M. Robineau.
The Board again discussed all matters relating to this case. The Board concluded that a short
response be sent to Mr. Robineau informing him that his matter was properly handled and
the matter is considered closed.
There being no further business to come before the Board, the meeting was adjourned.
Dated this 11th day of March, 2003.
Ruben M. Medina, Chief Clerk
Prepared by:
Catherine Croswell
Tax Board Secretary
MINUTES OF A REGULAR MEETING
OF THE ARIZONA STATE BOARD OF TAX APPEALS
HELD Aprill, 2003
The State Board of Tax Appeals, after notice duly posted, held a regular meeting at 9:00
a.m., on Aprill, 2003,100 N. 15th Avenue, Suite 140, Phoenix, Arizona.
Present were:
Board
William L. Raby, Chairman
Thomas W. Bade, Member
Janice C. Washington, Member
Staff
Ruben M. Medina, Chief Clerk
Alisha L. Woodring, Hearing Officer
The meeting was called to order by Mr. Raby, Chairman. Mr. Raby called for any
corrections, deletions, additions to the minutes of March 11, 2003. It was moved by Mr. Bade
and seconded that the minutes stand approved as written. The vote was 3-0-0 in favor. It was so
ordered.
The Board then considered the following:
APPROVAL OF DECISIONS:
1. Brice and Arlesa Hammond - 1877-02-AFTC - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as corrected. The vote was 3-0-0. It was so ordered.
CONSIDERATION FOR DISMISSAL:
2. Michael R. Schaefer dba Arcadia Lodge - 1891-03-S
The Appellant had been requested to file a Board prescribed, properly executed power of
attorney. The Power of Attorney filed on March 22, 2003 was not notarized, but signed
under Az.R.Civ.Proc.80(i). A copy of the rule was provided for the Board's review.
The Board considered the matter and allowed a final 15 day extension to perfect the power
of attorney form. Failure to file the Board's prescribed, properly executed power of attorney
will be cause for dismissal of this matter.
FOR DECISIONS:
3. Ormond Builders, Inc. - 1883-02-1
Oral hearing was held on March 11, 2003. The Appellant had filed the post-hearing
information requested by the Board.
The appeal involved transaction privilege tax assessments for the State of Arizona and the
City of Show Low for the audit periods of October 1995 through February 2000.
.. . " ..
Page 2
Discussion was held by the Board and the matter was deferred for final decision.
4. Span Construction & Engineering, Inc. 1885-02-S(4)
Oral hearing scheduled for this date was' cancelled due to the parties having waived oral
hearing.
The appeal involved transaction privilege tax assessments issued for the State of Arizona,
the cities of Gilbert, Marana, and Tolleson for the audit period August 1997 through May,
2001.
Discussion was held by the Board and the matter was deferred for final decision.
FOR DISCUSSION:
5. Standing Pre-hearing Order proposed by William L. Raby, Chairman.
Discussion was held on this matter and the Board determined that the portion relating to
representation and expert witnesses be sent to the parties with the hearing notice.
There being no further business to corne before the Board, the meeting was adjourned.
Dated this 1st day of April, 2003.
Ruben M. Medina, Chief Clerk
Prepared by:
Catherine Croswell
Tax Board Secretary
MINUTES OF A REGULAR MEETING
OF THE ARIZONA STATE BOARD OF TAX APPEALS
HELD May 6, 2003
The State Board of Tax Appeals, after notice -duly posted, held a regular meeting and
hearings commencing at 8:45 a.m., on May 6, 2003, 100 N. 15th Avenue, Suite 140, Phoenix,
Arizona. .
Present were:
Board
William L. Raby, Chairman
Jacalyn A. Askin, Member
Janice C. Washington, Member
Staff
Ruben M. Medina, Chief Clerk
Alisha L. Woodring, Hearing Officer
The meeting was called to order by Mr. Raby, Chairman. Mr. Raby called for any
corrections, deletions, additions to the minutes of April 1, 2003. It was moved by Ms.
Washington and seconded that the minutes stand approved as written. The vote was 2-0-1 in
favor. It was so ordered.
(The regular meeting was recessed until the conclusion of the hearing scheduled for 9:00 a.m.)
The Board reconvened the meeting at 9:50 a.m. and then considered the following:
APPROVAL OF DECISIONS:
1. Span Construction & Engineering, Inc. - 1885-02-S (4) - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as corrected. The vote was 2-0-1. It was so ordered.
2. Ormond Builders, Inc. - 1883-02-S - Upheld
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as corrected. The vote was 2-0-1. It was so ordered.
MOTION FOR DISMISSAL:
3. Marillyn Baehr - 1897-03-1
The Board considered Appellee's Motion to Dismiss Appeal as Premature.
The appeal was found to be premature as the Appellant had protested to the Director of the
Department of Revenue and a decision had not been rendered by the Director.
The Board having considered the motion, it was moved by Ms Washington and seconded
that the motion be granted. The vote was 2-0-1. It was so ordered.
Page 2
FOR DECISIONS:
4. Alan Stang - 1886-02-1
Oral hearing waived by the parties. To be considered for decision.
The appeal involved a proposed income tax assessment issued for the tax years 1993 through
1998, plus penalties and interest.
Discussion was held by the Board and the matter was deferred for final decision.
5. Harold and Leona Resteiner - 1890-03-1
Oral hearing waived by the parties. To be considered for decision.
The appeal involved a proposed income tax assessment issued for the tax year 1998, plus a
late payment penalty and interest.
Discussion was held by the Board and the matter was deferred for final decision.
6. Douglas and Jamie Roessing - 1889-03-AFTC
Oral hearing was held at 9:00a.m. on this date. To be considered for decision.
The appeal involved the Department's denial of Appellants' claim for an alternative fuel tax
credit for the tax year 2000.
Discussion was held by the Board and the matter was deferred pending the filing of post­hearing
information by the Department.
There being no further business to come before the Board, the meeting was adjourned.
Dated this 6th day of May, 2003.
~ -- """"-,,(, .
Ruben M. Medina, Chief Clerk
Prepared by:
Catherine Croswell
Tax Board Secretary
MINUTES OF A REGULAR MEETING
OF THE ARIZONA STATE BOARD OF TAX APPEALS
HELD May 27, 2003
The State Board of Tax Appeals, after notice _duly posted, held a regular meeting and
hearing commencing at 8:45 a.m., on May 27, 2003, 100 N. 15th Avenue, Suite 140, Phoenix,
Arizona. .
Present were:
Board
William L. Raby, Chairman
Janice C. Washington, Member
Staff
Ruben M. Medina, Chief Clerk
Alisha L. Woodring, Hearing Officer
Absent
Jacalyri A. Askin, Member
The meeting was called to order by Mr. Raby, Chairman. Mr. Raby called for any
corrections, deletions, additions to the minutes of May 6, 2003. It was moved by Ms.
Washington and seconded that the minutes stand approved as written. The vote was 2-0-1 in
favor. It was so ordered.
The Board then considered the following:
APPROVAL OF DECISIONS:
1. Alan Stang - 1886-02-1 - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as written. The vote was 2-0-1. It was so ordered.
2. Harold and Leona Resteiner - 1890-03-1 - Denied
(Decision draft prepared by Alisha L. Woodring, Hearing Officer)
The Board, having reviewed the decision, it was moved by Ms. Washington and seconded
that the decision be approved as written. The vote was 2-0-1. It was so ordered.
CONSIDERATION OF MOTIONS TO DISMISS:
3. Lawrence and Mamie Arrington - 1400-95-1
The Board considered Appellee's Motion to Dismiss for Lack of Subject Matter Jurisdiction.
The motion was based on the Appellants' failure to timely appeal the decision of the
Department's Hearing Office to the Board.
The Board having considered the motion, it was moved by Ms. Washington and seconded
that the motion be granted. The vote was 2-0-1. It was so ordered.
4. Catherine Dahnert - 1896-03-1
The Board considered Appellee's Motion to Dismiss for Lack of Subject Matter Jurisdiction.
Page 2
The motion was based on the Appellant's failure to timely appeal the proposed assessments
to the Department of Revenue.
The Board having considered the motion, it was moved by Ms. Washington and seconded
that the motion be granted. The vote was 2~0-1. It was so ordered.
(The regular meeting was recessed unt

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ARIZONA STATE SENATE
RESEARCHSTAFF
TO: JOINT LEGISLATIVE AUDIT COMMITTEE
Representative John Huppenthal, Chair
Senator Robert Blendu, Vice Chair
DATE: January 4, 2005
SEANLAUX
LEGISLATIVE RESEARCH ANALYST
FINANCE COMMITTEE
Telephone: (602) 926-3171
Facsimile: (602) 926-3833
SUBJECT: Sunset Review of the Arizona State Board of Tax Appeals
Attached is the final report of the sunset review of the Arizona State Board of Tax Appeals,
which was conducted by the Senate Finance and House ofRepresentatives Ways & Means Committee
of Reference.
The Committee ofReference recommends that the Arizona State Board ofTax Appeals be
continued for ten years.
This report has been distributed to the following individuals and agencies:
Governor ofthe State of Arizona
The Honorable Janet Napolitano
President of the Senate
Senator Ken Bennett
Senate Members
Senator Dean Martin, Cochair
Senator Jack W. Harper
Senator Marilyn Jarrett
Senator Jack A. Brown
Senator Jorge Luis Garcia
Arizona State Board of Tax Appeals
Office of the Auditor General
Department of Library, Archives & Public Records
Senate Majority Staff
Senate Research Staff
Senate Minority Staff
Senate Resource Center
SL/jas
Speaker of the House of Representatives
Representative Jake Flake
House Members
Representative Steven Huffman, Cochair
Representative Ken Clark
Representative Jack Jackson, Jr.
Representative Michele Reagan
Representative Steven Yarbrough
House Majority Staff
House Research Staff
House Minority Staff
Chief Clerk
Senate Finance and House ofRepresentatives Ways & Means
Committee ofReference Report
ARIZONA STATE BOARD OF TAX APPEALS
Background
The Arizona State Board ofTax Appeals (BOTA) was established in 1974 to provide taxpayers
with an administrative forum to appeal decisions ofthe Arizona Department ofRevenue (DOR). BOTA
is a quasi-judicial agency that is not under the control or purview ofDOR, which is comprised ofthree
members appointed by the Governor. BOTA hears and decides appeals involving income taxes,
transaction privilege taxes, estate taxes, use taxes and luxury taxes, the award ofattorney fees and costs
and any other matter oftaxation assigned to it from a decision ofDOR and the Office ofAdministrative
Hearings. BOTA decisions may be appealed to Tax Court.
According to BOTA's FY 2004 Strategic Plan, the agency's goal is to receive and process tax
appeals expeditiously to prevent any delays in the appeals process. To achieve this goal, BOTA has the
stated objective ofmaintaining the current timely processing ofappeals and issuance ofwritten decision
within 30 days of Board action.
The Joint Legislative Audit Committee assigned the review ofa performance audit ofBOTA to
the Senate Finance and House of Representatives Ways and Means Committee of Reference.
Budget
According to the Joint Legislative Budget Committee, Fiscal Year 2005 Appropriations Report,
BOTA's FY 2004 budget estimate was $273,300, which is appropriated as a lump sum from the General
Fund. BOTA reports that the agency's FY 2004 actual expenditures were $238,200.
A.R.S. § 41-3005.11 dictates that the Board is to terminate on July 1,2005, unless continued.
Committee Sunset Review Procedures
The Committee of Reference held one public hearing on Tuesday, November 30, 2004, to
review the sunset factors prepared by the Board and to receive public testimony. Testimony was
received from representatives ofthe Board.
Committee Recommendations
The Committee of Reference recommends that the Arizona State Board of Tax Appeals be
continued for ten years.
Sunset Report Requirements Pursuant to A.R.S. § 41-2954
I. Identification of the problem or the needs that the agency is intended to address.
The Arizona State Board of Tax Appeals provides an inexpensive, independent, informal and
impartial venue in which taxpayers can be represented before an experienced tax tribunal by themselves
(in most cases), CPAs, enrolled agents, other authorized individuals or attorneys. The Board's
published decisions provide guidance to taxpayers within and without the State of Arizona.
II. Statement of the objectives of the agency and its anticipated accomplishments.
The Board's stated objective is to maintain the current timely processing ofappeals and issuance
ofwritten decisions within 30 days ofBoard action. The FY 2003-2004 estimate for backlogged cases
requiring a written decision was 10; the length for processing appeals was 6.5 months. The Board was
able to issue all written decisions within the stated timeframe and reduced the appeal processing time
from 6.5 to 4.5 months.
III. Identification of any other agencies with similar, conflicting or duplicative objectives and
an explanation of the manner in which the agency avoids duplication or conflict with other
such agencies.
The Board's objectives may overlap with those of the Department ofRevenue (DOR) and the
Office ofAdministrative Hearings (OAH). However, the Board is a quasi-judicial agency, the decisions
ofwhich, unlike DOR and OAH, are not subject to further administrative review. Board decisions are
appealable only to Tax Court, which is part of the Superior Court. DaR's main objective is to
administer and enforce the state's tax laws, while that ofOAH is to provide uniform hearing processes
among state administrative agencies. The Board's principle objective, however, is to provide taxpayers
with a fair and financially feasible opportunity for representation before a tribunal of focused tax
experts. These professionals are experienced in the field of taxation and are appointed by the
Governor - not salaried state employees. Thus, the objectives of the agencies are not duplicative.
IV. Assessment of the consequences of eliminating the agency or of consolidating the agency
with another agency.
The elimination ofthe Board would significantly and detrimentally impact the Arizona Superior
Court by increasing the caseload of the Tax Court. This would most likely result in fewer and less
timely decisions being issued in nonproperty tax cases. Additionally, the elimination of the Board
would impact taxpayer representatives, DaR and taxing authorities across the country that look for
guidance on tax issues. Lastly, the possibility of consolidation of the Board with another agency was
previously considered and rejected by the Regulatory Reform and Enforcement Study Committee.
Attachments
1. Agenda of the Senate Finance and House of Representatives Ways & Means Committee of
Reference.
2. Meeting Minutes of the Senate Finance and House of Representatives Ways & Means
Committee of Reference.
3. Agency response to the Sunset Questionnaire
4. Enabling Statute and Board Rules
5. Budget tables for FY 2003-2004 and FY 2004-2005
6. Strategic Plan
7. BOTA Meeting Minutes
8. BOTA Sample Decisions
Senate Finance and House of Representatives Ways & Means
Committee of Reference
Meeting Agenda
Interim agendas can be obtained via the Internet at http://www.azleg.state.az.us/lnterimCommittees.asp
ARIZONA STATE LEGISLATURE
INTERIM MEETING NOTICE
OPEN TO THE PUBLIC
SENATE FINANCE AND HOUSE OF REPRESENTATIVES
WAYS AND MEANS COMMITTEE OF REFERENCE
Date:
Time:
Place:
Tuesday, November 30, 2004
10:00 a.m.
Senate Hearing Room 1
AGENDA
1. Call to Order
2. Opening Remarks
3. Non-sunset Audit on the Gila County Transportation Excise Tax
• Presentation by the Office of the Auditor General
• Public Testimony
• Discussion and Recommendations by Committee of Reference
4. Sunset of the Board of Tax Appeals
• Presentation by the Board of Tax Appeals
• Public Testimony
• Discussion and Recommendations by Committee of Reference
5. Sunset of the Municipal Tax Code Commission
• Presentation by the Municipal Tax Code Commission
• Public Testimony
• Discussion and Recommendations by Committee of Reference
6. Adjourn
Members:
Senator Dean Martin, Cochair
Senator Jack Brown
Senator Jorge Garcia
Senator Jack Harper
Senator Marilyn Jarrett
11/19/04 cd
Representative Steve Huffman, Cochair
Representative Ken Clark
Representative Jack Jackson Jr.
Representative Michele Reagan
Representative Steven Yarbrough
Persons with a disability may request a reasonable accommodation such as a sign language interpreter, by contacting the
Senate Secretary's Office: (602)926-4231 (voice). Requests should be made as early as possible to allow time to arrange the accommodation.
Senate Finance and House of Representatives Ways & Means
Committee of Reference
Meeting Minutes
ARIZONA STATE LEGISLATURE
Forty-sixth Legislature - Second Regular Session
SENATE FINANCE AND HOUSE OF REPRESENTATIVES
WAYS AND MEANS COMMITTEE OF REFERENCE
Minutes of Meeting
Tuesday, November 30, 2004
Senate Hearing Room 1 - lO:OO a.m.
Chairman Martin called the meeting to order at lO:03 a.m. and attendance was noted by the
secretary.
Members Present
Senator Brown
Senator Garcia
Senator Harper
Senator Martin, Cochair
Senator Jarrett
Members Absent
Speakers Present
Representative Reagan
Representative Yarbrough
Representative Huffman, Cochair
Representative Clark
Representative Jackson
Sean Laux, Research Analyst, Senate Family Services Committee
Carol West, Member, Tucson City Council; Vice Chair, Municipal Tax Code Commission
Dot Reinhard, Auditor General's Office
David Patterson, Finance Director, Gila County
Ruben Medina, Executive Director, Arizona State Board of Tax Appeals
Sean Laux, Research Analyst, Senate Family Services Committee, reviewed the responsibilities
of the Committee of Reference (COR). He noted that sunset hearings will be conducted on the
Arizona State Board of Tax Appeals (BOTA) and the Municipal Tax Code Commission
(MTCC), as well as a non-sunset audit of the Gila County Transportation Excise Tax.
Sunset of the Municipal Tax Code Commission
Carol West, Member, Tucson City Council; Vice Chair, Municipal Tax Code Commission,
provided historical background on formation of the MTCC. She stated that the oversight role of
the MTCC has provided a check against inconsistent changes to the Model City Tax Code by
SENATE FINANCE AND HOUSE WAYS AND MEANS
COMMITTEE OF REFERENCE
November 30,2003
individual cities and towns, as well as a forum for the business community to comment upon
proposed changes and suggest changes of their own. The MTCC meets only when necessary and
operates at essentially no cost to the State, except for minimal staffing by the Arizona
Department of Revenue (DOR). Recognizing the great importance of the local sales tax as a
revenue source for all cities and towns in Arizona, she believes the Commission should be
continued. The MTCC gives the business community a place to object or voice concerns about
this local tax, and consistency in changes to the code, while preserving local authority over the
most important local revenue source.
Mr. Huffman moved that the Committee make a recommendation to
continue the Municipal Tax Code Commission for an additional 10 years.
The motion carried.
Audit on the Gila County Transportation Excise Tax
Dot Reinhard, Auditor General's Office, reviewed the audit performed on the Gila County
Transportation Excise Tax (Attachment 1).
Senator Brown remarked that the funds were not necessarily spent illegally, but for the public
benefit, and cautioned against over-regulating.
Senator Martin stated that he is especially concerned about the gifts with public monies and
suggested that the Committee meet again during the next interim to make sure the
recommendations are implemented.
Senator Brown noted that the problems were corrected and changes were made. Also, the
Auditor General's Office would let the Members know if the recommendations are not
implemented.
Ms. Reinhard indicated to Mr. Yarbrough that the County agreed to determine the amount of
inappropriate expenditures and compare those against indirect costs for that particular fund
because monies were not transferred to the General Fund for indirect service costs. The County
believes the amount of inappropriate expenditures would be less than the amount that should
have been transferred to the General Fund for indirect costs. If that is the process the County
took to implement that recommendation, it would have to be looked at, but she made the
recommendation that going forward the County should follow appropriate accounting procedures
and transfer that money to the General Fund for indirect service costs. As far as remedies, in the
past the Attorney General's Office was involved in cases where counties inappropriately used
excise tax monies and agreements were established to reimburse the funds appropriately.
Senator Martin asked about non-public groups that received monies. Ms. Reinhard responded
that has not yet been determined, but there is the potential of expenditures that violate public
monies where she does not believe the General Fund could be used to reimburse the Road Fund.
At this point, she is not sure how those would be handled.
Senator Martin could not recall the statutory penalty, but submitted that it is fairly severe.
SENATE FINANCE AND HOUSE WAYS AND MEANS
COMMITTEE OF REFERENCE
November 30, 2004
2
David Patterson, Finance Director, Gila County, stated that he does not know how the auditors
came up with 11 percent in questionable costs. Originally, the auditors conducted a random
sample over three years, pulling 40 items per year, and found one item that was questionable.
Based on that, the auditors said it was an attribute sampling versus a variable sampling, but he
does not believe 1 item out of 120 equates to 11 percent questionable items. The auditors then
started doing judgmental samples, and when that is done, specific items are looked for, and those
cannot be projected to the population as a whole. Some of the items that were questioned are not
that significant, although they are against the statutes. For example, $500 for Kids Voting out of
$2.5 million for one year and $48 for flowers from the community for someone's funeral. The
Board of Supervisors was notified that those kinds of decisions cannot be made without
identifying that it is for the betterment of the community and initialing the request. The County
is in the process of correcting those items.
Senator Martin remarked that using money from the transportation plan for the public good
becomes problematic no matter the amount. He requested the specifics of changes that need to
be made, the illegal or inappropriate expenditures, and the plan detailing the fix.
Mr. Patterson indicated to Ms. Reagan that he is not opposed to a review by the Auditor General
in six months, but the presentation by the Auditor General's Office implied that the issue is more
horrendous than it actually is. In fact, the funds were spent inappropriately; however, he believes
the $500 donated to Kids Voting should be allowable. The only problem was that the supervisor
did not initial the request, but believed it was in the best interest of the community to make the
donation.
Ms. Reagan commented that if the Auditor General's findings are somewhat inflated, perhaps
another audit would help clear the County's name.
Mr. Patterson advised Senator Martin that Kids Voting is not necessarily beneficial to
transportation as it is to the community, but it was not public money given to a private charity
that had no benefit to the community. It was not appropriate to be part of the transportation tax,
but that is something that has been changed. At one time, the County had three road crews that
were consolidated into one public works. Constituent Services was paid out of the Road Fund,
but that was offset by what the County considers chargeable indirect costs. A decision was made
that was inappropriate because the two could not be identified, so Constituent Services was
pulled from the Road Fund and put into the General Fund where the County began charging the
indirect costs. The County is in the process of making things more compartmentalized, which is
also why a new financial accounting system will be implemented in January 2005.
Mr. Huffman stated that a memo from Mr. Nelson, the current County Manager, states that he
agrees to all of the sample inappropriate expenditures amounting to over $46,000, the County
needs to improve the auditing process, and there may actually be more than $46,000 that the
County is attempting to identify and develop potential solutions.
Senator Martin stated that he appreciates the efforts that have been made, and therefore, does not
recommend any action on the Legislature's behalf this session, but he would like to follow-up
SENATE FINANCE AND HOUSE WAYS AND MEANS
COMMITTEE OF REFERENCE
November 30, 2004
3
with the Auditor General's Office and possibly hold another Committee meeting if the issues
have not been worked out and reimbursement made.
Sunset of the Board of Tax Appeals
Ruben Medina, Executive Director, Arizona State Board of Tax Appeals, conveyed that he has
been in this position since BOTA was created in 1974 and has handled many thousands of tax
appeals in all areas of taxation. The sunset review report submitted to the COR on
September 1, 2004 addresses all of the factors requested by the Committee. The Board consists
of three members and staff includes himself, a hearing officer, and a secretary. There were
previously five full-time employees, but now there are only three due to budget reductions. The
caseload can only be handled because of a decrease in cases from previous years.
He stated that the type of cases that are heard are generally very complex after having gone
through various appeals at DOR and the Office of Administrative Hearings (OAR), which
handles sales and use tax type cases; however, BOTA has a very well qualified board of
professionals. He conveyed that the number of months to process appeals was reduced from
seven-and-a-half in 1999 to four-and-a-half presently. BOTA makes decisions within 30 days
that are disseminated throughout the country because requests are constantly made since many
times the decisions address issues of first impression. In 2002, BOTA completely revised the
rules and procedures, shortening the appeals process.
He anticipated additional appeals to be filed, not only later this fiscal year, but next fiscal year,
mainly because of a $6.5 million appropriation by the Legislature to DOR for the revenue­generating
program. With that, an additional 153 FTEs were appropriated, which will cause
more audits and protests to DaR, and eventually, more appeals to BOTA. If additional funding
is needed for another hearing office, a supplemental may be requested from the Joint Legislative
Budget Committee, but until that happens, additional funding will not be requested.
He indicated to Ms. Reagan that BOTA rules for DaR about 80 percent of the time. From
tracking through the Attorney General's Office, the courts upheld BOTA's decisions about
90 percent of the time.
Mr. Huffman moved that the Committee recommend continuation of the
Board of Tax Appeals for an additional 10 years. The motion carried.
Without objection, the meeting adjourned at 10:48 a.m.
(Original minutes, attachment, and tape are on file in the Office of the Chief Clerk.)
SENATE FINANCE AND HOUSE WAYSAND MEANS
COMMITTEE OF REFERENCE
November 30, 2004
4
Agency Response
ARIZONA BOARD OF TAX APPEALS
100 North 15th Avenue - Suite 140
Phoenix, Arizona 85007
602.364.1102
September 1, 2004
Dean Martin,
State Senator
Chair, Senate Finance Committee of Reference
Re: Sunset Review Process
Dear Senator Martin:
As requested, the State Board of Tax Appeals submits this report addressing each of the factors
listed in your letter dated July 30, 2004.
Should you or the Committee of Reference need additional information or have any questions,
please contact this office.
Sincerely,
.,/)
~- W\~_
Ruben M. Medina
Executive Director
cc
Members, Committee of Reference
1.
THE OBJECTIVE AND PURPOSE
IN ESTABLISHING THE AGENCY.
The Arizona State Board of Tax Appeals (the "Board") was established in July of 1974 to provide
taxpayers, which includes individuals, small businesses, corporations and municipalities with the
benefits of an independent, effective and inexpensive opportunity to appeal decisions of the
Arizona Department of Revenue (the "Department") without the burdens commonly associated
with court proceedings.
2.
THE EFFECTIVENESS WITH WHICH THE AGENCY
HAS MET ITS OBJECTIVE AND PURPOSE AND THE
EFFICIENCY WITH WHICH IT HAS OPERATED.
Throughout the years, the Board has successfully fulfilled its mission to afford taxpayers access
to expertise in a fair and impartial venue at minimal cost.
The Board is a quasi-judicial agency that is not in any way sUbject to the supervision or control of
the Department. Its three governor-appointed and senate-confirmed members serve six-year
terms. They are highly qualified professionals selected on the basis of their knowledge and
experience in the field of taxation and recognized by the Arizona Court of Appeals as tax
experts.1 The Board imposes no filing fees on taxpayers while adjudicating all appeals before it
involving income, estate, transaction privilege, use and luxury taxes, the award of attorney fees
and costs and any other matter of taxation assigned to it by law from decisions of the
Department and the Office of Administrative Hearings (the "OAHj.
The Board has effectively reduced the average number of months required to complete its
appeal process from a high of 15.5 months in FY 1996 to 7.5 months by 1999 - the time of the
last sunset review. Through a complete revision of its rules in 2002, the Board has streamlined
its appeal procedures, further reducing the process by two months. Taxpayers can currently
complete the appeals process before the Board in 4.5 months. In FY 1996, the Board had a
backlog of 97 decisions to be written. There currently is no backlog and decisions are generally
issued no more than 30 days after a hearing. See Attachment 4 for samples of decisions.
3.
THE EXTENT TO WHICH THE AGENCY HAS
OPERATED WITHIN THE PUBLIC INTEREST.
In its practices and procedures, the Board strives always to operate within the public interest.
It complies with all statutes governing open meetings and the disclosure of public records. See
Attachment 3 -- Minutes.
The Board's decisions are widely disseminated throughout the country by various publishing
companies including Lexis, Commerce Clearing House and Prentice Hall. Additionally. the Board
provides copies of its decisions from both taxpayers and taxing authorities upon reasonable
request.
Neither the Department nor OAH publish their decisions, and the extensive workload of the
Arizona Tax Court greatly limits the number of written decisions it issues in the non-property tax
areas regularly addressed by the Board. Therefore, the Board's published decisions provide
1 An attorney and two certified public accountants currently comprise the Board.
much-needed guidance to taxpayers, tax practitioners and taxing authorities, local and across
the country, especially concerning issues of first impression.
The Board and its staff regularly participate in pertinent local tax seminars and review tax
publications and court decisions to track current trends and recent developments in the field of
taxation.
4.
THE EXTENT TO WHICH RULES ADOPTED BY
BY THE AGENCY ARE CONSISTENT WITH
THE LEGISLATIVE MANDATE.
In order to best fulfill its legislative mandate, the Board completed a thorough revision of its rules
in 2002.
There had been significant changes in the statutes governing the tax appeals process
(A.R.S. §§ 42-1252 and 1253) since the administrative rules were last reviewed. Beginning in
August of 1995, the Board no longer consists of Division One and Division Two. Division
One has become the State Board of Equalization. The former Division Two is now known as
the State Board of Tax Appeals. The Board may now hear appeals from the Office of
Administrative Hearings, which was created effective October 1, 1995, in addition to those
from the Arizona Department of Revenue. Where the amount in dispute before the Board is
less than twenty-five thousand dollars, a taxpayer may now be represented by a certified
public accountant, a person enrolled to practice before the United States Internal Revenue
Service and recognized as an enrolled agent, or any other person who is authorized by the
taxpayer under a properly executed power of attorney and who was previously or is currently
retained by the taxpayer for purposes other than representation in a hearing before the
Board.
Due to the significant statutory changes and the attendant changes in the Board's policies
and practices, all of the Board's rules were repealed and replaced with new sections
reflecting the changes. Additionally, any mistakes in grammar, spelling, style or punctuation
existing in the text of the repealed statutes were corrected when incorporated into the new
rules, and a definitional section was added. Finally, to optimize the effectiveness of the
rules, changes were made to improve the clarity, conciseness and understandability of the
rules.
5.
THE EXTENT TO WHICH THE AGENCY HAS ENCOURAGED
INPUT FROM THE PUBLIC BEFORE ADOPTING ITS RULES
AND THE EXTENT TO WHICH IT HAS INFORMED THE
PUBLIC AS TO ITS ACTIONS AND THEIR EXPECTED
IMPACT ON THE PUBLIC.
During the course of its rule revision, the Board specifically sought input from those in the tax
community who regularly appear before the Board and are most affected by its actions. Copies
of proposed rules were disseminated to members of the Arizona Society of Certified Public
Accountants, the Arizona Society of Public Accountants, the Tax Section of the Office of the
Attorney General, and tax attorneys.
The Board reviewed all suggestions and comments it received, addressed any concerns noted
and made revisions to the proposed rules when appropriate. The Board properly posted all
2
public notices and held public hearings, and the rules became final after the Governor's
Regulatory and Review Council ("GRRC") approved them.
6.
THE EXTENT TO WHICH THE AGENCY HAS BEEN ABLE
TO INVESTIGATE AND RESOLVE COMPLAINTS THAT
ARE WITHIN ITS JURISDICTION.
The Board has received one complaint since the last Sunset Review. A taxpayer, who declined
to appear at an oral hearing before the Board, complained that the Board did not sufficiently
understand the written materials submitted to it and upon which it based its decision in favor of
the Department. The taxpayer contended that the validity of this complaint was confirmed when
the Department decided to settle with the taxpayer rather than pursue the matter in Tax Court.
The Assistant Attorney General representing the Department explained to the taxpayer in writing
that the settlement was offered because the relatively small amount in dispute did not justify the
cost in time and expense required to continue to Tax Court. Nevertheless, the taxpayer filed
complaints with the Department, with the State Bar of Arizona against the Assistant Attorney
General., and -- after an exchange of correspondence on the matter with the Board dating back
to 1995 -- the taxpayer eventually filed an appeal with GRRC concerning the Board's rules. The
petition to GRRC specifically addressed the taxpayer's objection to the Board's lack of a rule
governing the burden of proof in proceedings before it.
The Board's original burden of proof rule, R16-3-118 of the Arizona Administrative Code
("A.A.C.") provided that the burden of proof as to all issues of fact was on the taxpayer. This rule
complied with the standard of proof established by case law in Arizona State Tax Commission v.
Kieckhefer.2
Prior to submitting its last rule-making package, the Board considered developing a new rule
shifting the burden of proof to the Department under certain specified conditions. The Board's
consideration was prompted by its desire, in an attempt to establish a standard burden, to be
consistent with the rule change adopted by the Tax Court. The Board invited comment on this
proposed rule from parties potentially affected by the change. The Department objected to the
change, and the Board was advised by counsel for GRRC that it would oppose such a change
and advise members of the Council to reject the Board's rule-making package in its entirety.
The Board proceeded with the remainder of the rule-making package, allowing R16-3-118 to
expire. After the Board's rules were approved and finalized, the Board reviewed the expiration of
rule R16-3-118. After considering the fact that, absent a duly approved rule to the contrary,
Kieckhefer established the standard of proof before the Board, and taking into account the rule­making
guidelines proscribing the incorporation into agency rules of requirements already
established outside of the rule, the Board chose not to attempt to circumvent these guidelines by
promulgating a new, redundant rule.
The issue was finally successfully resolved April 16, 2004 when the governor signed legislation
addressing the burden of proof in hearings before the Board.3 Appellant withdrew his appeal on
April 20, 2004.
2 "The presumption is that an additional assessment of income tax is correct, and the burden is on the
taxpayer to overcome such presumption." Arizona State Tax Commission v. Kieckhefer, 67 Ariz. 102, 191
P.2d 729 (1948).
3 A.R.S. § 42-1255 provides, in part, that "[t]he Department has the burden of proof by a preponderance of
the evidence in any administrative or judicial proceeding regarding any factual issue that is relevant to
ascertaining the tax liability of a taxpayer. This section does not abrogate any provision of this title or title
43 that requires a taxpayer to substantiate an item of income or expense."
3
7.
THE EXTENT TO WHICH THE ATTORNEY GENERAL OR ANY
OTHER APPLICABLE AGENCY OF STATE GOVERNMENT
HAS THE AUTHORITY TO PROSECUTE ACTIONS
UNDER THE ENABLING LEGISLATION.
The Board is not a regulatory agency. The Office of the Attorney General represents the
Department in appeals before the Board but neither the Attorney General nor any other State
agency prosecutes actions under the Board's enabling legislation.
8.
THE EXTENT TO WHICH THE AGENCY HAS ADDRESSED
DEFICIENCIES IN THEIR ENABLING STATUTES WHICH
PREVENTS IT FROM FULFILLING ITS STATUTORY MANDATE.
There are no deficiencies in the statutes governing the Board that have prevented it from
fulfilling its statutory mandate. Statutory changes have been enacted to assist the Board in best
fulfilling its statutory mandate. Until 1997, practice before the Board was limited to licensed
attorneys. In 1997, legislation was enacted to permit CPAs and agents enrolled before the
Internal Revenue Service to practice before the Board when disputes involve less than $5,000.
A.R.S. § 42-1253(0) (formerly A.R.S. § 42-172(0». In 1998, the legislature further amended the
statute to extend non-attorney representation to any other person authorized by the taxpayer
under a properly executed power of attorney who was previously or is currently retained by the
taxpayer for purposes other than representation in a hearing before the Board. The amendment
also raised the economic threshold requirement for all non-attorney representation to $25,000.
Any attorney who is either a member of the Board or staff hearing officers employed by the
Board, as well as Assistant Attorney Generals representing the Department before the Board
could not function in accordance with this legislation without running afoul of the Code of
Professional Responsibility, which prohibits attorneys from assisting or contributing to the
unauthorized practice of law. Therefore, the Board petitioned the Arizona Supreme Court asking
it to amend Rule 31 of the Rules of the Supreme Court governing attorneys to specifically allow
non-attorneys to practice before the Board. The Court adopted a rule allowing CPAs and
enrolled agents to practice before the Board.
9.
THE EXTENT TO WHICH CHANGES ARE NECESSARY TO
ADEQUATELY COMPLY WITH THE FACTORS LISTED IN THIS
SUBSECTION.
Although there are no deficiencies in the statutes governing the Board that have prevented it
from fulfilling its statutory mandate, the amendment of Rule 31 of the Rules of the Supreme
Court may require future revision to A.R.S. § 42-1253.
Although the Arizona Supreme Court amended Rule 31 to allow CPAs and enrolled agents to
practice before the Board's attorneys, it did not address the final class of non-attorney
representation permitted under A.R.S. § 42-1253(0)(3), i.e., representation by any other person
authorized by the taxpayer under a properly executed power of attorney who was previously or is
currently retained by the taxpayer for purposes other than representation in a hearing before the
Board.
4
Nevertheless, the Board intends to fulfill the legislative mandate of the statute. If at any time it
becomes necessary for an attorney seNing the Board to be recused from participating in any
proceeding, the remaining quorum of the Board will conduct the hearings and write the decisions
in these cases.
10.
THE EXTENT TO WHICH THE TERMINATION OF THE
AGENCY WOULD SIGNIFICANTLY HARM THE
PUBLIC HEALTH, SAFETY OR WELFARE.
The elimination of the Board would significantly and detrimentally impact taxpayers. The Board
provides an inexpensive, informal and impartial venue in which taxpayers can represent
themselves in most cases. Taxpayers may also be represented before the Board by CPA's,
enrolled agents or other authorized individuals, as well as attorneys. There are no filing fees, the
rules of evidence are relaxed and Appellants are afforded a non-intimidating atmosphere in
which they have the opportunity to fully state their positions and present their evidence. The
Board provides a review of appeals completely independent from the Department by highly­qualified
Board members, hearing officers and staff that work exclusively with tax matters. The
Board is the only State agency that issues written decisions that are published and provide
guidance to taxpayers.
The elimination of the Board would significantly and detrimentally impact the Arizona Superior
Court. The elimination of the Board would significantly increase the already heavy caseload of
the Arizona Tax Court, which is a division of the Superior Court. This would certainly result in
even fewer and less timely decisions being issued in non-property tax cases.
The elimination of the Board would significantly and detrimentally impact taxpayer
representatives, the Department and taxing authorities across the country who look to the
Board's decisions for guidance on tax issues.
11.
THE EXTENT TO WHICH THE LEVEL OF REGULATION
EXERCISED BY THE AGENCY IS APPROPRIATE AND
WHETHER LESS OR MORE STRINGENT LEVELS OF
REGULATION WOULD BE APPROPRIATE.
This inquiry does not apply to the Board. The Board is not a regulatory agency.
12.
THE EXTENT TO WHICH THE AGENCY HAS USED PRIVATE
CONTRACTORS IN THE PERFORMANCE OF ITS DUTIES
AND HOW EFFECTIVE USE OF PRIVATE CONTRACTORS
COULD BE ACCOMPLISHED.
The Board has not used private contractors to perform its duties, nor has it sought funding to do
so. Private contractors could not perform the duties of the Board members who are appointed
by the governor. In addition to the Executive Director and the Board Secretary, the Board
employs a hearing officer. The hearing officer is an attorney and full-time State employee who
conducts legal research, presides over hearings, writes proposed decisions, revises rules and
generally assists the Executive Director in the administration of the agency. It would neither be
practical nor cost-efficient to utilize private contractors for these duties. Neither would the
requisite level of expertise be generally available among private contractors.
5
ADDITIONAL REQUESTED INFORMATION
1. DESCRIBE THE ROLE AND FUNCTION OF THE AGENCY, INCLUDING MAJOR
ACTIVITIES/PROJECTS, ACCOMPLISHMENTS AND OBSTACLES TO SUCCESS.
As previously addressed, the Board provides an inexpensive, independent, informal and
impartial venue in which taxpayers can be represented before an experienced tax tribunal by
themselves (in most cases), CPA's, enrolled agents, other authorized individuals or attorneys.
The published decisions of the Board provide guidance to taxpayers within and without the State
of Arizona.
The Board successfully completed the thorough revision of all its rules, and effectively petitioned
the Arizona Supreme Court to amend Rule 31 to allow non-attorneys to practice before the
Board.
The Board has reduced the average number of months required to complete its appeal process
from a high of 15.5 months in FY 1996 to 4.5 months. There is currently no backlog and
decisions are generally issued no more than 30 days after a hearing.
Like all state agencies, the Board has had to work within tight bUdget constraints. This can
present an obstacle to the Board's efforts to maintain a timely and efficient appeals process.
For FY 2004-2005, the Department was appropriated additional funding for the revenue
generating program in the amount of $6,537,000 and 153 FTE positions. The additional audits
and protests this appropriation will facilitate will certainly impact the Board's caseload. The
potentially dramatic increase in appeals to the Board may necessitate the full funding of the
additional hearing officer position that is currently vacant.
Budget limitations may also prevent the Board from remaining current in the area of information
technology. The Board is researching the feasibility of creating a website affording interested
parties with easier access to the Board's forms, rules and decisions. The cost of the requisite
software and computer upgrades may delay this project for some time.
2. PROVIDE DETAILED FINANCIAL DATA, INCLUDING BUT NOT LIMITED TO: NUMBER OF
FULL-TIME EMPLOYEES, DETAILED EXPENDITURES,IDENTIFY AND QUANTIFY ALL
REVENUES AND FEE STRUCTURE (IF APPLICABLE) FROM EACH FUND SOURCE.
See Attachment 2 for financial data.
Any revenue generated by the Board is minimal and wholly attributable to funds received for
providing copies of Board records and hearing tapes. These funds totaled $0.1 in FY 2002 ­2003
and $0.0 in FY 2003 - 2004.
3. AN IDENTIFICATION OF THE PROBLEM OR THE NEEDS THAT THE AGENCY IS
INTENDING TO ADDRESS.
As previously addressed in section 1 above, the Board may need to address the consequences
created by a significantly increased caseload and the need for IT updates with limited available
resources.
6
4. A STATEMENT, TO THE EXTENT PRACTICABLE, IN QUANTITATIVE AND QUALITATIVE
TERMS, OF THE OBJECTIVES OF THE AGENCY AND ITS ANTICIPATED
ACCOMPLISHMENTS.
See Attachment 2.1-Strategic Plan
5. AN IDENTIFICATION OF ANY OTHER AGENCIES HAVING SIMILAR, CONFLICTING OR
DUPLICATIVE OBJECTIVES, AND AN EXPLANATION OF THE MANNER IN WHICH THE
AGENCY AVOIDS DUPLICATION OR CONFLICT WITH OTHER SUCH AGENCIES.
To some extent, the Board's objectives may overlap with those of the Department and the OAH.
However, the Board is a quasi- judicial agency, the decisions of which, unlike the Department
and the OAH, are not subject to further administrative review. Board decisions are appealable
only to the Tax Court, which is part of the Superior Court. The Department's main objective is to
administer and enforce the State's tax laws, while that of the OAH may be to provide uniform
hearing process among State administrative agencies. The Board's principle objective, however,
is to provide taxpayers with a fair and financially feasible opportunity for representation before a
tribunal of focused tax experts. These professionals are experienced in the field of taxation and
are fellow citizens appointed by the governor - not salaried state employees. Thus, the
objectives of the agencies are not truly duplicative.
6. AN ASSESSMENT OF THE CONSEQUENCES OF ELIMINATING THE AGENCY OR OF
CONSOLIDATING IT WITH ANOTHER AGENCY.
The purpose and objective of the Board and its service to the public interest is thoroughly
addressed in the sunset review, and the consequences of the void created if the Board were to
be eliminated are clear. The distinctive and focused function of the Board does not permit its
consolidation with another agency.4
4The possible consolidation of the Board was previously considered and rejected by the Joint study
Committee on Regulatory Reform and Enforcement.
7
Enabling Statute & Board Rules
42-1251 TAXATION 1058
may be returned at any time before the expiration of nine
months from the date of such levy.
D. In its discretion and at any time, the department may
release a levy or return property levied on if the department'
determines that any of the following conditions applies:
1. The levy was premature or otherwise in violation 'of the
department's administrative procedures.
2. The ta.xpayer has entered into an installment payment
agreement, unless the agreement provides otherwise.
3. The department's interests are best served by the release
or return. 1999
ARTICLE 6. TA.\: APPEALS
42·1251. Appeal to the department; hearing
A. Except in the case of individual income ta.\:es, a person
from whom an amount is determined to be due under article 3
of this chapter may apply to the department by a petition in
writing within forty-five days after the notice of a proposed
assessment made pursuant to section 42-1109, subsection B or
the notice required by section 42-1108, subsection B is re­ceived,
or within such additional time as the department may
allow, for a hearing, correction or redetermination of the
action taken by the department. In the case of individual
income ta.\:es the period is ninety days from the date the notice
is mailed. The petition shall set forth the reasons why the
hearing, correction or redetermination should be granted and
the amount in which any ta."{, interest and penalties should be
reduced. If only a portion of the deficiency assessment is
protested, all unprotested amounts of ta."{, interest and penal­ties
must be paid at the time the protest is filed. The
department shall consider the petition and grant a hearing, if
requested. To' represent the ta."{payer at the hearing or to
appear on the ta.\:payer's behalf is deemed not to be the
practice of law.
B. If the ta.~ayer does not file a petition for hearing,
correction or redetermination within the period provided by
this section, the amount determined to be due becomes final at
the expiration of the period. The ta."{payer is deemed to have
waived and abandoned the right to question the amount
determined to be due, unless the ta.\:payer pays the total
deficiency assessment, including interest and penalties. The
ta."{payer may then file a claim for refund pursuant to section
42-1118 within six months of payment of the deficiency assess­ment
or within the time limits prescribed by section 42-1106,
whichever period expires later.
C. All orders or decisions made on the filing of a petition for
a hearing, correction or redetermination become final thirty
days after notice has been received by the petitioner, unless
the petitioner appeals the order or decision to the state board
ofta."{ appeals. 199i
(See Arizona Annotation Seruice)
42·1252. State board of ta."'I: appeals
A. The state board of ta.\: appeals is established as an
independent agency which shall not in any way be subject to
the superrision or control of the department of revenue. The
board shall have full power to hear and decide all appeals from
decisions of the department of revenue.
B. The state board shall consist of three members ap­pointed
by the governor pursuant to section 38-211. Members
shall be residents of this state.
C. Members shall be selected on the basis of their knowl­edge
of and experience in ta."{ation. Not 'more than two
members may be primarily engaged in the same occupation or
profession. The board shall handle all matters entrusted by
law to it dealing with income tuation, estate ta.,;ation, trans·
action privilege, use and lu:cury ta.ution and•. any other
ta.,;ation assigned to it by law and shall hear and decide
appeals from the department of revenue on such matters.
D. Not more than two members of the board shall be
members of the same political party. No member of the board
shall hold any other public office under the laws of this state or
any ofits political subdivisions. No member shall be a candi.
date for an elective office under the laws of this state, nor of
any other state. No member of the board shall hold any
position of trust nor provide or engage in any occupation or
business which would corruptly conflict with the duties of a
member of the board, nor take part directly or indirectly in
any election campaign in the interest of any political party or
other organization or any candidate or measure to be voted on
by the people. This subsection does not prohibit a person from
properly and lawfully engaging in a business or profession.
E. The term of board members is six years. The member of
the board having the shortest term remaining shall act as
chairperson if that member has served on the board at least
two years. If the member ha\-ing the shortest term remaining
does not qualify to act as chairperson or if two or more
members have an equal right by virtue of their remaining
terms to serve as chairperson, the board shall elect a chair­person.
A melJ1ber may not be appointed for more than two
terms.
F. Each member of the board sh:lll receive:
1. One hundred fifty dollars per day for time spent in the
perform:lnce of official duties.
2. Such travel and other expenses as pro\-ided by law for
other state officers.
G. The governor may remove any member for cause.
R. The board shall appoint a clerk, hearing officers and
such other employees as it deems necessary to carry out its
duties. The hearing officer qualifications shall be the same as
the selection criteria for the members as prescribed by this
section. Notwithstanding section 41-192, subsection E, upon
request of the board, the attorney general shall designate, for
such time and purposes as the board requires, -an attorney,
acceptable to the board, whose compensation shall be fixed
and paid by the board.
I. The board shall hold hearings and meetings at the call of
the chairperson or a majority of the board and otherwise as
may be prescribed by the rules of the board as required to
carry out its duties. The principal office of the board shall be at
the capitol, but the board may sit or hold hearings at any other
place within the state. A majority of the board constitutes a
quorum for making orders and decisions or transacting other
official business, and the board may act even though one
position on the board is vacant. The board shall keep a record
of its proceedings.
J. In conducting the business of the board:
1. The board may not act if more than one position is
vacant.
2. One or more members or a hearing officer of the board
may hold hearings and take testimony to be reported for
action by the board when authorized by rule or order of the
board. 1997
42-1253. Appeal to state board or ta."C appeals; defini-tion
A. Except as provided in section 42-1254, Subsection C, a
person aggrieved by a final decision or order of the department
under section 42-1251, Article 3 of this chapter or section
42-2065,42-2068,42-2069,42·2074.42-2201 or 42·2202 may
appeal to the state board of ta.\: appeals by filing a notice of
appeal in writing within thirty days after the decision or order
from which the appeal is taken has become final.
B. The board shall take testimony and examine documen·
tary evidence as necessary to determine the appeal, all pur·
suant to administrative rules to govern such appeals.
1059 TA.XPAYER PROTECTION AND SERVICES 42·1254
ARTICLE 2. TAXPAYERS' BILL OF RIGHTS
ARTICLE 1. COr-.'"FIDENTIALIIT OF TAXPAYER
lNFO&.'rL